The average 30-year fixed mortgage rate rose two basis points to 6.68% according to rates provided to NerdWallet by Zillow. A basis point equals one one-hundredth of a percentage point. Rates had been falling for two weeks and are lower than the roughly 7% levels from April through June. Rising core CPI (2.9% to 3%) and a higher unemployment rate (4.1% to 4.2%) reflect slowing job growth, with just 106,000 nonfarm payrolls added from May through July. The Federal Reserve faces conflicting signals between inflation and employment, creating policy uncertainty that likely contributed to the modest rate uptick. Most recent borrowers remain unlikely to benefit from refinancing unless rates fall substantially, such as to 6%.
Since the Trump tariffs were announced in April, financial markets have tried to assess their effects on inflation and employment. It turns out that both economic indicators are getting worse. The core consumer price index rose from 2.9% in June to 3% in July, while the unemployment rate rose from 4.1% to 4.2%. Job growth slowed way down, with nonfarm payrolls increasing a total of just 106,000 jobs from May through July, compared to 380,000 in the three months before that.
It's unusual for inflation and unemployment to go up at the same time, and the phenomenon puts the Federal Reserve in a bind. Should it leave short-term interest rates alone to curb inflation, or cut them to encourage job growth? Just a week ago, investors felt confident that the Fed would focus on employment and reduce short-term rates when it meets next month. But they're less certain now - and that uncertainty might have driven this week's slight increase in mortgage rates.
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