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Home / Blog / Mortgage Rates / Mortgage Rates

Mortgage Rates

April 7, 2011 By Mary Catchur

Mortgage rate chartPeople say that “life is full of surprises.” And last week’s Jobs Report offered a few surprises of its own. But were those surprises positive, and what do they mean for home loan rates overall? Read on for details. The headline Jobs Report number showed that 216,000 jobs were created in March, which was a positive surprise as this was above expectations. In addition, 230,000 jobs were created in the private sector, which was also better than expectations and offset a decline in government jobs. A small 2,000 upwards revision to February’s prior release added some more jobs as well. In addition, the Unemployment Rate surprisingly dropped to 8.8%, which is the lowest unemployment rate since March of 2009. Remember, the Unemployment Rate is derived from the Household Survey (exactly as it sounds, from calls made to households), and is considered to be more accurate than the Current Employment Statistics or Business Survey (again as it sounds, from calls made to businesses), which is used to determine the headline jobs number. The one negative within the report is Hourly Earnings coming in at 0.0%. This is the second month in a row where earnings growth is 0.0%. Why is this significant? If earnings don’t grow, people have less to spend and as a forward looking indicator on job growth, it shows that businesses are presently not under any pressure to raise wages. This means they may not have to hire new people as quickly because they may have room to raise wages for present workers down the road. Overall, the Jobs Report was a good report and reminds us that the trend in the labor market is improving. But keep in mind, while lowering unemployment is good for our economy overall – as are the other two goals (creating inflation and boosting Stock prices) of the Fed’s current Quantitative Easing (QE2) program – these goals can also lead to higher home loan rates over time. In fact, inflation continues to be a growing concern both around the world and here in the U.S., as several members of the Fed, including St. Louis Fed President James Bullard, have expressed concern that if the Fed waits “too long (to remove accommodative monetary policy) we will get a lot of inflation in the United States and around the world.” What does this mean in the long run? Like the Treasury Department, at some point the Fed will start selling some of its massive holdings and unwind their QE1 and QE2 purchases. And when it does, not only will the Bond market lose a buyer in the Fed, but they will gain a seller and this will make it hard for Mortgage Backed Securities and home loan rates, which are tied to these types of Bonds, to meaningfully improve. If you have been thinking about purchasing or refinancing a home, call or email me to learn more about how you can benefit. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates.

With the nuclear crisis continuing to unfold in Japan, and the turmoil in the Middle East, world events may continue to surprise our markets. Otherwise, it’s a quiet week when it comes to economic reports, but be sure to look for:

  • The minutes from the Fed’s March 15 meeting of the Federal Open Market Committee will be released on Tuesday. These always have the potential to move the markets, especially if inflation (which is the arch enemy of Bonds and home loan rates) is discussed.
  • Thursday’s weekly Initial and Continuing Jobless Claims Report. Last week’s Initial Jobless Claims were reported at 388,000, just above expectations, but below that important 400,000 marker which shows that the labor market continues to improve.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds and home loan rates managed to end the week about the same place as where they began… despite the volatility. I’ll be watching closely to see what this week brings.

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Filed Under: Mortgage Rates

Opinions, estimates, forecasts and other views contained in this page do not necessarily represent the views of Marimark Mortgage or its management and should not be construed as an offer to provide financing at the rates or terms mentioned. Due to market fluctuations, interest rates are subject to change at any time and without notice. Interest rates are also subject to credit and property approval. Although Marimark Mortgage attempts to provide reliable, useful information, it does not guarantee that the information is accurate, current or suitable for any particular purpose. Information from this page may be used with proper attribution.

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