After dropping to a two-year low last month, mortgage rates are back on the rise, thanks to a better-than-expected report on the labor market. Let’s break down what’s happening and how it affects you.

Earlier this summer, mortgage rates started falling as investors expected the Federal Reserve to lower interest rates due to concerns about the economy—especially rising unemployment. By mid-September, we saw mortgage rates drop to their lowest point in two years. But the recent positive news on inflation and the labor market is causing those rates to start climbing again.

Current Mortgate Rates

As we are writing this, the average interest rate for a 30-year fixed mortgage is 6.29%, which is a little higher than last week’s 6.22%. The rate for a 15-year fixed mortgage, is also up; 5.57% this week compared to 5.41% last week.

Not a HUGE difference, but don’t be surprised if they continue to rise.

What’s Behind the Rate Increase?

In September, the U.S. added 254,000 jobs, and unemployment fell to 4.1%. When the economy improves, especially in the job market, we typically see mortgage rates increase. If the labor market had stayed the same or gotten worse, the Fed probably would have cut interest rates to try to turn things around. But, as long as the economy holding steady, most experts believe they will either leave things as is, or continue make small, cautious rate cuts moving forward.

Just remember, mortgage rates aren’t only affected by what the Federal Reserve does. They are impacted by several other factors; inflation, stock market activity, and economic indicators, like labor reports. So, if you’re waiting for lower mortgage rates before you buy, you may have a while to wait.

Understanding Different Mortgage Rates

Here’s a snapshot of current average rates for various types of mortgages: (NOTE: These are nation-wide averages. Please check with a local lender for rates in your area.)

30-year fixed: 6.275%, up from 6.18%

30-year jumbo: 6.457%, up from 6.40%

30-year FHA: 6.052%, up from 5.89%

30-year VA: 5.733%, up from 5.66%

30-year USDA: 5.989%, slightly down from 5.99%

15-year fixed: 5.503%, up from 5.36%

If you’re thinking about a 15-year mortgage, remember that while the monthly payments are higher, you’ll pay less interest over time. Jumbo mortgages, on the other hand, are for larger loan amounts that exceed standard limits, but they often come with higher rates.

A mortgage broker can help you find the best rates available based on your financial situation.

A Look Back at Mortgage Rates

If today’s rates around 6-7% seem high, it’s helpful to put things in perspective. As some of our more seasoned agents will tell you, in the early 1980s, average mortgage rates reached as high as 19%! Even last year, rates peaked at 8.01%, their highest in over two decades.

While it’s unlikely we will see rates fall to the Pandemic low of 2.65%, they are MUCH lower than they were two decades ago. And, most experts still expect the rates to drop a bit more as the Federal Reserve makes rate cuts in an effort to improve our overall economy.

If you are in the market to buy a home, you want to stay informed and explore all of your options. And if you need help navigating the real estate “jungle”, we are here to help guide you. Give us a call at (479) 747-2466 today.