Mortgage rates fell for the third week in a row on signs that businesses are reluctant to hire.
The average rate on a 30-year fixed-rate mortgage fell 14 basis points to 6.11% APR in the week ending Oct. 16, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.
Just three weeks ago, the average rate was almost a quarter of a percentage point higher, at 6.35%.
What’s been moving rates
This year, mortgage rates have been pushed and pulled in opposite directions by two economic forces. Inflation has pushed mortgage rates upward, while unsteady job creation has pulled rates lower. They fought to a draw for the first seven months of the year.
But the outlook has changed since the beginning of August. A slowdown in hiring has been at the top of policymakers’ minds, and mortgage rates have fallen.
“The labor market is weak,” said Christopher Waller, a Federal Reserve governor, in an Oct. 10 interview on CNBC’s “Squawk Box” program. He implied that the slump in hiring could translate into Fed rate cuts.
Waller is on the Fed’s rate-setting committee, so his words sway markets. So do the utterances of the Fed’s chair, Jerome Powell, who said in an Oct. 14 speech in Philadelphia, “In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen.”
Translation from Fedspeak: Businesses aren’t hiring enough people, and I wouldn’t be surprised if the unemployment rate rises.
The central bank cuts the overnight federal funds rate when the economy sheds jobs. Lower interest rates are designed to stimulate more hiring. They do that by encouraging businesses and consumers to borrow money. The Fed lowered the federal funds rate in September. Investors overwhelmingly expect the Fed to reduce it again at its next meeting, Oct. 28-29, and again at the Dec. 9-10 meeting.
What it means for buyers and refinancers
The Fed doesn’t control mortgage rates, but its actions exert an indirect influence on mortgages. The expectation of more Fed rate cuts could pull rates lower in coming months.
“With signs of softer economic momentum and a cooling labor market, mortgage rates may drift slightly lower through 2026,” said Kara Ng, senior economist for Zillow Home Loans, in a statement.
Ng expects rates to drop a little, not a lot. “Even with modest rate relief, affordability remains a challenge for home buyers,” she said. But she pointed out that buyers have gained negotiating power because homes are staying on the market longer, giving house hunters more time to choose.
Lower rates provide an opportunity for refinancers, too. It might be worth looking into a mortgage refinance if you can reduce your interest rate by half a percentage point or more. A refinance could be especially enticing for homeowners with interest rates north of 7% — people who bought homes from late summer to fall 2023, the spring of 2024 and early this year.
