Mortgage rates rebounded this week on stronger than anticipated employment and wage growth data. Last week’s strong jobs report caused yields and the mortgage rates that shadow them to rebound sharply. Wage growth remains robust. Wages are up nearly 4% year over year, ticking up slightly from 3.9% in August. Strong wage growth coupled with strong stock market growth and lower interest rates are a boon to household finances. 

In August, core inflation —measured by the consumer price index (CPI)—accelerated. Core prices increased at an annualized rate of 3.4%, up from 2% in July, exceeding both the three-month and six-month averages. On a year-over-year basis, core prices are up 3.3%.

The future path for the fed funds rate is still not clear, as the Fed chair suggested further rate cuts will entirely depend on incoming economic data. Traders are now putting the probability of a 50 basis point rate cut at the next FOMC meeting at 0%, down from 32% before the jobs report.

More stubborn core inflation would likely prevent further declines in long dated yields and mortgage rates. Expect more mortgage rate volatility as traders process the incoming data and change their forecasts for economic growth and the path of the fed funds rate.

Mortgage rates rising from 6.1% to 6.6% over this last week means it likely no longer makes financial sense to refinance for about 275,000 of last year’s home buyers. Collectively, those homeowners could have saved roughly $6.2 billion on their mortgage payments over the next five years if they refinanced when rates were at 6.1%. Check out the Zillow research post here for more information.