Mortgage rates reached their lowest point in two months last week as the job market showed signs of cooling, according to data released by the Mortgage Bankers Association (MBA) this week.
The benchmark 30-year fixed rate mortgage fell to 6.30 percent from 6.40 a week earlier, leading to a rebound in demand, MBA data showed.
“Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30 percent – the lowest level in two months,” Mike Fratantoni, MBA’s chief economist said in a news release.
While the March gain of 236,000 jobs was less than the February haul of 314,000 jobs, according to the Labor Department, the jobless rate fell from 3.6 percent in February to 3.5 percent last month.
MBA’s Market Composite Index, which measures mortgage loan application volume, rose 5.3 percent on a seasonally adjusted basis from one week earlier.
“Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8 percent,” Fratantoni said.
Mortgage rates are falling even as the Federal Reserve continues to target inflation with interest rate hikes. And a report released by the Labor Department on Wednesday showed that inflation is cooling.
The consumer price index fell to a 5 percent annual increase in March from 6 percent in February. This is down from 9.1 percent at its peak in June.
Economists have said lower inflation could lead to lower mortgage rates in the future.
“Calmer inflation means lower mortgage rates, eventually. The 5 percent consumer price inflation in March is a steady improvement from 9 percent last summer, 8 percent in autumn, 7 percent during Christmas, and 6 percent in the early months of this year,” Lawrence Yun, chief economist for the National Association of Realtors said in a statement.
“Mortgage rates slipping down to under 6% looks very likely towards the year’s end,” Yun concluded.