What’s Ahead For Mortgage Rates This Week : September 4, 2012

September 4, 2012 by

Jobs Report In FocusMortgage markets improved last week for the second consecutive week.

With no news coming from Europe, Wall Street was focused U.S. economic data and Federal Reserve Chairman Ben Bernanke’s planned public speech from the Fed’s annual retreat in Jackson Hole, Wyoming.

Rate shoppers and home buyers caught a break.

The housing market was shown to be improving last week, as was the average household income nationwide — two events which would have typically moved  mortgage rates higher. But, because the Fed Chairman used his speech to signal that new economic stimulus may be imminent, mortgage rates dropped.

The Fed is expected to launch a bond-buying program that would create new demand for mortgage-backed bonds. Mortgage-backed bonds are the basis for most U.S. mortgage rates and the new-found demand would result in lower rates nationwide. 

According to Freddie Mac’s weekly mortgage rate survey, the 30-year fixed rate mortgage rate fell to 3.59% last week for borrowers willing to pay 0.6 discount points plus a full set of closing costs, where 0.6 discount points is a one-time closing cost equal to 0.6 percent of your loan size.

Conventional mortgage rates open this week at a 4-week best. Threats to low rates remain, however.

A European Central Bank meeting is scheduled for Thursday and the release of the August Non-Farm Payrolls report is due Friday. Both events could have negative repercussions on mortgage rates. 

For example, the ECB is expected to announce new aid measures for some its struggling member nations, including Greece, Spain and Italy. If the aid package “ends” the sovereign debt issues which have plagued the European Union since 2010, equity markets would rally on the news at the expense of bond markets. This would drive U.S. mortgage rates higher as investors dump their bond holdings.

Similarly, if the August jobs report is deemed “strong”, it would lower the likelihood of new Fed-led stimulus. This, too, would lead mortgage rates higher — perhaps by a lot.

Economists expect to see that 130,000 net new jobs created last month. The jobs report will be released Friday at 8:30 AM ET.

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Mortgage Rate Risk Ahead Of Friday Morning’s Jobs Report

July 5, 2012 by

Non-Farm Payrolls Since July 2010

Friday morning, the Bureau of Labor Statistics will release its Non-Farm Payrolls report. More commonly called “the jobs report”, Non-Farm Payrolls is a monthly market-mover.

Depending on the strength — or weakness — of the data, mortgage rates will change. Perhaps sharply. Unfortunately, we can’t know in which direction.

If you’re actively shopping for a mortgage , therefore, today may be a prudent day to lock a mortgage.

The job report’s connection to mortgage rates is straight-forward. As the number of U.S. citizens earning paychecks increases, reverberations are felt through the economy.

First, higher levels of income are tied to higher levels of consumer spending and consumer spending accounts for the majority of the U.S. economy. More working citizens, therefore, builds a larger overall economic base.

Next, as the overall economic base grows, businesses produce and sell more goods, necessitating the hiring of additional personnel and the purchase of more raw materials — both positives for the economy.

And, lastly, as more paychecks are written, more taxes are paid to local, state and federal governments. These taxes are often used to fund projects and purchase goods and services which, in turn, grow the economy as well.

Tying it all together, the health of the U.S. economy is a major factor is setting day-to-day mortgage rates. This is why rate shoppers face risk with tomorrow’s Non-Farm Payrolls report.

Between 2008 and 2009, the economy shed 7 million jobs. It has since recovered 3.9 million of them and, Friday, analysts expect to see another 100,000 jobs created in June. If the actual number of jobs created exceeds this estimate, look for mortgage rates to rise. 

If the actual number of jobs created falls short of 100,000, mortgage rates may fall.

The government releases Non-Farm Payrolls data at 8:30 AM ET Friday.

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Make A Mortgage Rate Plan Ahead Of The Jobs Report

May 3, 2012 by

Non-Farm Payrolls 2000-2012

Been shopping for a mortgage rate? You may want to lock something down. Tomorrow morning, mortgage rates are expected to change. Unfortunately, we don’t know in which direction they’ll move. 

It’s a risky time for home buyers to be without a locked mortgage rate.

The action begins at 8:30 A.M. ET Friday. This is when the government’s Bureau of Labor Statistics releases its April Non-Farm Payrolls report.

The monthly Non-Farm Payrolls report is more commonly known as “the jobs report” and provides a sector-by-sector breakdown of the U.S. employment situation, including changes in the Unemployment Rate.

In March 2012, the government reported 120,000 net new jobs created — half the number created during the month prior, and the third straight month of declining job creation. The Unemployment Rate fell one-tenth of one percent to 8.2%.

For April, economists expect to see 160,000 net new jobs created, and no change in the national Unemployment Rate.

Based on the accuracy of those predictions, mortgage rates are subject to change. If the actual number of jobs created in April exceeds economist expectations, mortgage rates should rise. Conversely, if the actual number of jobs created falls short, mortgage rates should drop.

Job growth’s link to mortgage rates is straight-forward. Jobs are an economic growth engine and mortgage rates are based economic expectation. Therefore, as the number of people entering the U.S. workforce increases, so do Wall Street’s growth projections for the economy. When that happens — especially in a recovering economy such as this one — mortgage rates tend to rise.

So, for today’s rate shoppers, Friday’s job report represents a risk. The economy has created jobs for 18 straight months, a winning streak that has added 2.9 million people to the U.S. workforce. If that winning streak continues and expectations are beat, mortgage rates are likely to rise off their all-time lows, harming home affordability.

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