Mortgage rates move lower on inflation, employment news

Mortgage rates this week fell to their lowest level since October, supported by one better than expected inflation report as well as ongoing concerns regarding employment data.

But an unexpected finding in the Bureau of Labor Statistics July Producer Price Index report could put a hold on a potential September Federal Open Market Committee short-term rate cut.

The 30-year fixed rate mortgage averaged 6.58% as of Aug. 14, the Freddie Mac Primary Mortgage Market Survey noted. This was down from last week when it averaged 6.63%. But for the same week a year ago, the 30-year FRM averaged 6.49%.

The last time the 30-year FRM was under 6.6% was the week of Oct. 24.

Meanwhile, the 15-year FRM dropped by 4 basis points to 5.71%, from 5.75% a week earlier. This is 5 basis points higher than a year ago, when it averaged 5.66%.

The PPI rose 0.9% versus June and 3.3% annually. In the aftermath, the 10-year Treasury, which dropped 5 basis points following Wednesday's Consumer Price Index report, rose by 3 basis points to 4.27% as of 11 a.m.

Because the PPI came in hotter than forecast, some are concerned that the FOMC may once again delay any policy easing, Samir Dedhia, CEO of One Real Mortgage, said in a statement.

"Some market participants are still expecting a potential rate cut in September, but others believe that a more cautious approach may prevail given the latest wholesale inflation surge," Dedhia continued. "This uncertainty is keeping bond markets on edge, which in turn continues to impact mortgage pricing."

What other rate trackers are showing

Lender Price data posted on the National Mortgage News website had the 30-year fixed at 6.57%. This is compared with 6.59% the week prior, when it fell by 24 basis points week-over-week.

Zillow's rate tracker put the 30-year FRM at 6.52% on Thursday morning, a gain of 1 basis point from Wednesday but down from an average of 6.68% the prior week.

The Aug. 1 employment triggered a continuing slide in mortgage rates, said Zillow Home Loans Senior Economist Kara Ng. The significant revisions to the data heightened investors' expectations that the FOMC would need to cut short-term rates in September to support economic growth.

The CPI report "largely aligned" with what observers expected, but "the data revealed signs that tariffs appear to be leaking into prices — a factor that could limit the Fed's flexibility for rate cuts in coming months — markets have, for now, prioritized concerns about the weakening labor market," Ng said in a Wednesday evening commentary. "As a result, mortgage rates continue to face downward pressure."

Is a refi boomlet going on right now?

On Wednesday, the Mortgage Bankers Association's Weekly Application Survey found the 30-year FRM fell to 6.67%, which it noted drove the strongest week since April for refinance volume.

"Regardless of what happens day to day, mortgage rates are lower than they were just a couple of weeks ago," said Holden Lewis, home and mortgage expert at Nerdwallet. "Homeowners who got high-rate mortgages in autumn 2023 might benefit from rate-and-term refinancing."

Dedhia agreed, adding it also opens the door for debt consolidation refis or situations where borrowers tap their home equity.

"Timing is key, and staying proactive in this window of lower rates may help borrowers make meaningful financial gains before the next policy shift or market turn."