Last week was another win for homebuyers as mortgage rates continued to fall despite surprisingly strong labor market data and a potential volatility following the midterms. All three major jobs reports came in better than expected, including Friday's blowout employment report, which would normally send mortgage rates higher. But rates barely budged. Meanwhile, the midterm elections brought a shift in control of Congress, raising hopes that political pressure could help ease tensions with Iran, bring oil prices down and ultimately provide some relief from inflation. This week's inflation reports will be the next big test.
The average rate on a 30-year fixed rate conventional loan continued to fall and it's now at 7.09%. Down from a high of 7.46% just 3 weeks ago.
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What the Midterm Elections Mean for Mortgage Rates
Last week's midterm elections shifted control of Congress to Democrats, creating a divided government for the next two years. While that could mean more political gridlock in Washington, it may actually be good news for mortgage rates. A divided Congress could limit additional government spending, while increased pressure to resolve the conflict with Iran and reconsider tariffs could help bring inflation down.
The initial market reaction was encouraging. Oil prices fell, Treasury yields declined and mortgage rates improved as investors began pricing in the possibility of reduced tensions in the Middle East. Lower oil prices would help ease inflation, which remains the biggest obstacle to lower mortgage rates. Of course, Congress can't end the war on its own, and Trump still has significant control over trade and foreign policy.
For homebuyers, there's reason to be cautiously optimistic. If the election ultimately leads to lower energy prices, fewer trade disruptions and more restrained government spending, mortgage rates could continue improving. But nothing changes overnight, and inflation will still have the final say. We took a closer look at what the midterm results mean for homebuyers and what could happen next.
Jobs, Jobs, Jobs
It was jobs week, and all three major reports pointed in the same direction: the labor market is stronger than it looked a month ago.
Tuesday's job openings report started things off with a surprise. There were 7.52 million open jobs in September, well above the 7.1 million expected and up more than 300,000 from August. Layoffs also fell to their lowest level since March 2025, while the number of workers voluntarily quitting jumped to its highest level in more than a year. There are now 1.06 job openings for every unemployed worker, another sign that labor demand remains relatively healthy.
ADP followed on Wednesday with another beat. Private employers added 86,000 jobs in October versus the roughly 69,000 expected. ADP has not been a particularly reliable predictor of the government's jobs report lately, but combined with the strong job openings data, it was another indication that the labor market was holding up better than expected.
Then came Friday's big one. The U.S. added 165,000 jobs in October, absolutely crushing expectations, while the unemployment rate fell to 4.1%. Normally, a report this strong would be bad news for mortgage rates. A healthy labor market gives the Fed much more room to keep interest rates higher while it focuses on inflation, and markets have already been worried about another rate hike.
But mortgage rates barely moved. Despite the huge jobs beat, the 10-year Treasury finished Friday around 4.86% and mortgage rates ended essentially flat. The selloff of AI stocks and other broader bond-market moves following the election actually had a bigger impact on yields than the jobs report itself. Considering how quickly rates have reacted to strong economic data this year, we'll gladly take that as a win.
There is also some weakness hiding underneath the headline numbers. Nearly 2 million Americans have now been unemployed for at least six months, and the average unemployed worker has been looking for a job for more than 27 weeks. So while companies are not laying off many workers, people who do lose their jobs are having a much harder time finding a new one. It is still a strange "low-hire, low-fire" labor market, just one that looked considerably stronger after this week's data.
What to expect this week?
Inflation is back in the spotlight this week, and after last week's surprisingly strong jobs report, we really need some good news. Tuesday's CPI and Friday's PPI reports will be the biggest drivers of mortgage rates. If inflation comes in cooler than expected, we could see mortgage rates continue improving. But another hot report would strengthen the Fed's case for raising rates in December and could reverse some of the recent progress.
Key reporting dates this week:
Mon, 11/9: Wholesale trade, Fed Presidents speaking
Tues, 11/10: NFIB Small Business Optimism Index, CPI, Core CPI, Fed officials speaking, Household Debt and Credit Report
Wed, 11/11: None scheduled
Thurs, 11/12: Initial jobless claims, Existing home sales, Fed officials speaking, Monthly Treasury balance
Fri, 11/13: PPI, Core PPI, Fed officials speaking
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Author:
Eric Bernstein
