The 30-year fixed mortgage rate surpassed the 7% mark on Monday on the heels of strong economic data and the Federal Reserve signaling that it will move carefully with any future cuts to interest rates.
The 30-year conforming fixed mortgage rate was at 7.04% on Mortgage News Daily and 6.91% on HousingWire’s Mortgage Rate Center.
It’s the first time since December that the average 30-year fixed rate has eclipsed 7%. Mortgage rates briefly exceeded 8% in October but had eased as investors gained confidence that the Fed was nearing the end of its phase of interest rate hikes.
Mortgage rates took a sharp turn following a blowout jobs report, which demonstrated that the U.S. labor market is posed to support broader economic growth. About 353,000 jobs were added in January, up from a revised rate of 333,000 in December.
Fed Chair Jerome Powell’s message that the central bank will move carefully on rate cuts, given in an interview with “60 Minutes” after last week’s Federal Open Market Committee (FOMC) meeting, is what sent mortgage rates higher on Monday.
“The prudent thing to do is … to just give it some time and see that the data confirm that inflation is moving down to 2% in a sustainable way,” Powell said in the interview that aired Sunday night.
“Growth is going on at a solid pace, the labor market is strong, 3.7% unemployment,” Powell said. “With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully. We want to see more evidence that inflation is moving sustainably down to 2%.”
After the most recent FOMC meeting on Feb. 1, Powell signaled that the central bank isn’t likely to cut interest rates in March as investors had hoped.
“In fact, Powell believes the Fed can wait until it sees more labor damage before cutting the Federal Funds Rate aggressively or moving toward a neutral policy stance, saying again that a March rate cut is ‘unlikely,’” Logan Mohtashami, lead analyst at HousingWire, wrote in commentary on Monday.
Mortgage rates track the yield on 10-year U.S. Treasurys, which move based on anticipation about the Fed’s actions, what the Fed actually does and how investors react. When Treasury yields go down, so do mortgage rates.
The 10-year Treasury yield rose to 4.16% as of Monday at 5 p.m. EST, up from 4.03% on Friday.
“Powell’s latest interview makes it clear: Nothing big will change over the next few months no matter what happens with inflation — the labor market hasn’t broken enough for the Federal Reserve to pivot,” Mohtashami wrote.