Mortgage rates level off as job growth fades

September 17th, 2013

The upward trend in mortgage rates has leveled off, just as the economy seems to have lost some of the momentum from earlier this year. The two are not unrelated.

Mortgage rates flatten out

Mortgage finance company Freddie Mac reported that as of September 12, 30-year mortgage rates had been stalled in a narrow range between 4.51 and 4.58 percent for four consecutive weeks. This followed a rapid rise which saw those rates increase by more than a full percentage point in less than three months.

When that rise in mortgage rates began, there was optimism about the economy as job growth seemed to be gathering momentum, but that momentum has faded in recent months - and perhaps some of the optimism has faded too.

Job growth loses momentum

On September 6, the Bureau of Labor Statistics reported that total US non-farm employment had grown by 169,000 jobs in August, a lackluster figure, especially since it was accompanied by downward revisions to prior employment estimates for the two previous months.

The job picture is fast becoming one of fading momentum. Over the first six months of this year, net job creation averaged nearly 195,000 a month. Over the next two months, the number of new jobs averaged less than 137,000.

The Fed has indicated that employment is a key factor guiding when it should phase out its interest rate intervention. The weaker job growth gets, the longer that intervention is likely to be prolonged.

Calculating the odds

If the economy is losing momentum and the surge in mortgage rates has halted, does that mean rates will soon be headed back down? In other words, will would-be home buyers get another bite at the low-interest-rate apple?

As anyone knows if they have run different rate scenarios through a mortgage calculator, a drop in rates would make home buying decisions much easier, either by making more expensive homes more affordable, or by helping the payments on a typical home fit more easily into a household budget. However, hoping for much of a drop in mortgage rates might be wishful thinking. Today's rates are still extraordinarily low by historical standards. Home buyers would be better off doing some careful budgeting with a mortgage payment calculator assuming today's rates than holding out for rates to get even more affordable.

Posted By :

Richard Barrington has earned the CFA designation and is a 20-year veteran of the financial industry, including having previously served for over a dozen years as a member of the Executive Committee of Manning & Napier Advisors, Inc. Richard has written extensively on investment and personal finance topics.

Budget deal leaves mortgage rates stable -- for now

October 23rd, 2013

The budget deal removes one potential disruption from the mortgage market, but don't expect rates to stay stable forever....  Read More

Mortgage rates caught in the crossfire of the fiscal showdown in Washington

October 16th, 2013

So far, the fiscal crisis has had a minimal impact on mortgage rates, but that could well change if the US government defaults on any obligations....  Read More

Shutdown squeeze play may cause mortgage fallout

October 09th, 2013

Showdowns over the federal budget and the debt ceiling threaten to put a damper on home prices and mortgage lending....  Read More

Latest figures reveal uptick in refinancing activity

October 02nd, 2013

An uptick in refinancing activity and the continuing rise in home prices show that refinancing opportunities still exist....  Read More

0 Responses to "Mortgage rates level off as job growth fades"

No Comments

Leave a Comment