Good News for Economy is Bad News for Rates

Mortgage markets worsened last week as domestic job growth surprised Wall Street and the Eurozone moved yet one more step closer to reaching a lasting Greece sovereign debt solution.

Conforming mortgage rates in Iowa rose on the news, although you wouldn’t know it from looking at Freddie Mac’s weekly mortgage rate survey.

According to Freddie Mac, the average 30-year fixed rate mortgage rate fell to 3.87% last week with 0.8 discount points due at closing, plus closing costs. 1 discount point is a fee equal to one percent of your loan size.

3.87% for a 30-year fixed rate mortgage is the official, all-time low for the weekly Freddie Mac survey, conducted since the 1970s. However, because Freddie Mac gathers its results on Monday and Tuesday only, by the time the survey results were released Thursday morning, mortgage rates were already rising off their lows.

Then, Friday morning, after January’s Non-Farm Payrolls data was released, mortgage rates surged.

The January jobs report exceeded expectations in nearly every fashion possible :

• Economists expected to see 135,000 jobs created in January. The actual number was 243,000.
• Economists expected to see the Unemployment Rate at 8.5% in January. The actual number was 8.3%.
• Revisions added an additional 180,000 net new jobs to the original 2011 tally.

As compared to one year ago, there are 2.1 million more people employed in the U.S. workforce. Figures like this hint at a stronger national economy, and that tends to drive mortgage rates up.

Specifically, What Did Those Reports Say?

Each week, I put up an economic calendar of news coming out that following week.   Here’s the what actually happened with those reports last week:

What Impacts Mortgage Rates?

If you’re looking to purchase or refinance a home, it’s important to know what moves mortgage rates.  There are normally two major things that impact the direction:

1. Economic News.  (Like the calendar above).
2. International News. (major events, pending legislation, war related news, etc).
3. Stock Market. (Money flows from equities (stocks) to bonds when it seeks shelter).

What Are Rates Based On?

It’s been mentioned before, but as a common reminder – mortgage rates are only based on one thing, Mortgage Backed Securities (MBS).  The only way you have access to these is through live bond quotes.

Looking For Mortgage Rates?

If you’re looking for specifically what mortgage rates are doing, I’d be happy to help with a custom rate quote.  Each scenario is different (there are 27 different factors a mortgage rate is determined by).  If you or someone you currently know are looking for a mortgage, I’m here to help!

Information without obligation.  That’s my policy.  If you like what you hear, my team and I would love to help you out with your mortgage!  Our contact information is on the top right hand side of this page!

Tagged as: Eurozone, Non-Farm Payrolls, Unemployment Rate