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June 7th, 2010

Jobs and Mortgage Rates

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Confidence is hard to come by these days. Friday’s jobs report certainly didn’t add to anyone’s confidence about a steadily-improving economic picture. Following the release of May’s employment report, stocks fell and hopeful aspirations were eroded. According to latest issue of HSH.com’s Market Trends Newsletter, an improving employment picture isn’t likely to influence higher mortgage rates in the immediate future:

The latest employment reports signal that while we’re on the right path, it’s still looking somewhat rocky. Given the number of job losses in the downturn — part of what the Fed considers “resource slack” — we may not see mortgage rate increases generated solely from labor market improvements any time soon.

Yet, can or will mortgage rates rise even with a docile job market? Sure they can:

That doesn’t mean that rates won’t move without them, but simply that rates are more likely to stay low the longer that too many people remain out of work. A shrinking labor pool means that wages rise more easily, and that can influence prices, contributing to inflation pressures. Inflation pressures (even merely concerns about inflation pressures) can push interest rates up. A lack of them has an opposite effect, although to a lesser degree.

Rates increased slightly last week:

HSH’s market-spanning Fixed-Rate Mortgage Indicator (FRMI) rose by three basis points (.03%) to finish HSH’s weekly survey at 5.21%. Calculated by including rates for conforming, jumbo, and the GSE’s “high-limit” conforming products, the FRMI includes covers a broad swath or the mortgage-borrowing public. The FRMI’s companion — the overall average for a hybrid 5/1 ARM — came in at an average interest rate of 4.28%.

How will the summer homebuying season stack up?

The unofficial start of summer is now past. With the spring ‘homebuying season’ winding down, the mortgage market usually gets lulled into a daze, most notably as we approach July 4 and beyond. This year, given the euro-zone troubles which have so influenced interest rates, it’s our sense that there will be somewhat less quiet than in years past, as market participants try to digest the solutions offered to some quite intractable problems abroad. There are enough concerns about parallel paths for the US to allow for much comfort, with questions about how we will manage our own commitments in the coming years.

Find out what’s in store for this week: CLICK HERE to continue reading “Jobs and Mortgage Rates.”

HSH.com’s free Market Trends Newsletter, an in-depth analysis of various financial markets from the week prior, is published every Monday. Email subscribers receive it in their inbox Friday night, so sign up today! Also, be sure to check in with our Market Trends blog for all news relating to any weekly shift in mortgage rates.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

Our bloggers:

Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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