Weak economic growth means low(er) mortgage ratesby Tim Manni
A lack of economic growth translates to, among many other things, a lack of employment opportunities. That was quite evident in September’s employment report:
After a two-quarter decline down to a 1.7% GDP, the economy may have stopped skidding in September. This deceleration has left growth at a place where there is insufficient demand to create many job opportunities, and without an expanding labor market, inflation remains tomorrow’s problem.
Unemployment claims have remained elevated for months; although improved over the depth of the recession, we have not even found a way to test the 400,000 level in the expansion. During the week ending October 2, another 445,000 new applications for benefits were filed at state unemployment offices. While still elevated, it was the best number since July and comparable to the best numbers of this year. Still, we have a long way to go before we’re back to normal.
Economic deceleration also means lower mortgage rates:
HSH’s overall mortgage monitor — our weekly Fixed-Rate Mortgage Indicator (FRMI) — saw the average rate for 30-year fixed-rate mortgages decline by four basis points (.04%), finding new territory at 4.66%. FHA-backed loans are available at an average rate of 4.33%, but there isn’t much homebuying activity going on at the moment. Hybrid 5/1 ARMs lost three basis points (.03%) to close the week at 3.58% HSH.com’s public data series include rates for conforming, jumbo, and most recently the GSE’s “high-limit” conforming products and so covers much of the mortgage-borrowing public.
Mortgage rates are at record lows, again, and without clarity on the direction of the economy, seem likely to continue this sideways drift. Perhaps the economy will show more firmness in the coming weeks, and perhaps the election will provide greater clarity on the direction of regulation, taxes and economic policy. Here’s hoping so, but until then, it is more of the same for rates next week.
CLICK HERE to continue reading the latest issue of our Market Trends Newsletter, “Employment Disappointment, Mortgage Rates Decline.”
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.