Mortgage rates fell again this week on soft labor market data. The near 50 basis point uptick in the unemployment rate outpaced even the FOMC’s own unemployment rate forecast, prompting concerns that recession risk could be increasing again. Wage growth also moderated further as the gap between labor demand and supply continues to close.

The US economy is expected to slow down in the fourth quarter and into next year; those expectations put downward pressure on Treasury yields — and the mortgage rates that tend to follow them – in recent days. 

However, constraints on monetary policy suggest a Fed policy reversal isn’t likely in the near term. Recent data revisions suggest excess savings for consumers are higher than previously estimated – that is, savings above and beyond normal pre-pandemic levels. This should support consumers and spending going into the holiday season. Loosening financial and credit conditions are also encouraging economic activity.

Next week’s consumer price index data release will likely prompt investors to recalculate their inflation forecasts, causing large swings in mortgage rates.