- The 30-year fixed-rate mortgage fell to a two-month low, the Mortgage Bankers Association said.
- The fifth straight weekly decline took place as the March jobs report showed signs of cooling.
Mortgage rates dropped to a two-month low as the labor market in the world's largest economy showed signs of a slowdown, prompting a surge in weekly applications for home loans.
The average contract interest rate for a 30-year fixed-rate mortgage fell to 6.30% in the week that ended April 7 from 6.40% in the prior week, the Mortgage Bankers Association said Wednesday.
That marked the fifth consecutive weekly fall in the lending rate for the country's most popular type of mortgage and stretched a trend of rates staying below 7% since November. The 30-year rate last year topped 7% for the first time since 2002.
"Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30%," Mike Fratantoni, the MBA's chief economist, said in the group's update.
The March payroll report released last week showed the addition of 236,000 jobs, fewer than an expected reading of 239,000. March's additions were also below February's upwardly revised increase. The unemployment rate fell to 3.5% from 3.6%.
"Prospective homebuyers this year have been quite sensitive to any drop in mortgage rates, and that played out last week with purchase applications increasing by 8%," Fratantoni said.
The five-week decline in mortgage rates comes alongside a burst of anxiety in markets after last month's collapse of Silicon Valley Bank and Signature Bank sparked a jump in deposits flowing out of small to mid-sized banks.
Bond yields have generally drifted lower as investors pushed into the Treasury market, seeking safety from the fallout from the first US bank failures since the global financial crisis.
But the immediate reaction in the bond market after Friday's jobs report was a climb in yields as investors appeared to see the labor market as still robust enough to keep the Federal Reserve in rate-hiking mode.
The recent drop in mortgage rates will likely bolster home sales by more than 200,000, Forbes reported this week, citing Lawrence Yun, the chief economist at the National Association of Realtors.
Mortgage rates are still well above where they were a year ago, at around 4.9%, keeping the option of purchasing a home out of reach for many people.
In a separate report, the MBA found that the housing environment is so unaffordable that some banks have lost money for each mortgage they financed last year, the first time on record.