Mortgage Rates Dip to Year-Low as Jobs Data Disappoints
With August job growth falling short of expectations, markets drive 30-year mortgage interest rates down, opening refinance and homebuying opportunities.
Falling job growth may be bad news for the economy, but it could bring welcome news for mortgage borrowers. A weaker-than-expected jobs report has already pushed rates lower, easing some of the pressure on today’s housing market.
For homebuyers, the shift offers a chance to secure a mortgage at a more affordable level than what we’ve seen in recent months. Lower borrowing costs can translate into smaller monthly payments and, in some cases, the ability to consider a wider range of homes.
Homeowners who purchased when rates were higher may also see an opening to refinance. A lower rate can cut monthly expenses or help shorten a loan term, giving borrowers more flexibility as they manage their finances.
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Dipping mortgage rates are promising for buyers
After years of mortgage rates hovering at or above 7%, there’s finally relief in sight for homebuyers. According to Mortgage News Daily data, average rates for a 30-year fixed mortgage dropped to 6.28% on Monday, September 8 — down from 6.53% just a week earlier.
It’s a welcome shift for both buyers and homeowners looking to refinance. Rates had climbed as high as 7.26% in January and 7.08% in May, so the recent drop could mean lower monthly payments and make homeownership more affordable.
How the jobs report lowered mortgage rates
On Friday, the Bureau of Labor Statistics released its jobs report for August with disappointing results. The unemployment rate increased to 4.3%, compared to 4.2% in July. Employers added just 22,000 jobs in August, indicating a slowdown in the labor market.
There are many potential reasons for the poor jobs report, including economic uncertainty generated by tariffs. The back-and-forth nature of the tariffs make it difficult for businesses to strategically plan, so businesses may be less likely to hire.
Additionally, inflation results in higher prices, and consumers are starting to limit their spending, impacting business profits and potentially resulting in staffing cuts.
Though the jobs report indicates trouble for the economy, it correlates with declining mortgage rates, and it could help lower interest rates even further.
Cutting interest rates can help boost the job market, making operational costs cheaper for businesses, but increasing interest rates helps fight inflation. Given the poor jobs report, the Fed might decide to lower interest rates to help boost employment, which could drop mortgage interest rates even more.
The perks of lower mortgage rates for homeowners and buyers
Lower mortgage rates could make it easier and more affordable for buyers to purchase homes, and that could mean that sellers receive more offers on their homes. Lower mortgage rates could prompt more buyers to enter the market, driving sales and increasing demand.
Homeowners may also choose to refinance a mortgage to take advantage of the current lower interest rates. Refinancing at a lower interest rate can lower your monthly payments by reducing the total interest you’ll pay.
If you’re struggling to make payments, you might choose to extend your loan term when you refinance. Alternatively, if you want to pay off your mortgage faster, you could refinance to take advantage of a lower interest rate while choosing a shorter loan term to pay off your loan sooner.
Just keep in mind that you'll pay a fee to refinance your home, and that can vary depending on the type of refinancing you choose and your new loan amount.
Explore and compare some of today's top refinance offers with the tool below, powered by Bankrate:
Additional ways to get lower mortgage rates
While mortgage rates may be falling, the actual interest rate you receive depends on several factors. You can take steps to maximize your chances of getting the lowest interest rate possible:
- Build your credit score. Lenders review your credit score and offer lower interest to borrowers with higher credit scores. Focus on making all of your payments on time to improve your credit score.
- Make a larger down payment. Lenders assume less risk when you make a large down payment, so they may offer you a lower interest rate. Plus, making a large down payment reduces your monthly mortgage payments and means you’ll pay less interest over the life of your mortgage.
- Reduce your debt-to-income ratio. A lender will also review the amount of existing debt you have compared to your income. If you have lots of debt, it can indicate that you’re at a higher risk of not being able to pay your mortgage, so lenders may charge you a higher interest rate to make up for some of that risk. Focus on paying off debts and working to increase your income.
If you’re ready to buy a home, take time to consider how much mortgage you can comfortably afford and get pre-approved so you’re prepared to make an offer when the right property comes along.
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