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Record-Low Mortgage Rates Face Threat In October Jobs Report

Posted November 5, 2014

Record-Low Mortgage Rates Face Threat In October Jobs Report

Non-Farm Payrolls : Jobs report expected to show 240,000 net new jobs created in October

Mortgage Rates And The Jobs Report

On the first Friday of each month, the Bureau of Labor Statistics publishes the Non-Farm Payrolls report. Commonly called "the jobs report", Non-Farm Payrolls highlights employment changes across 10 private labor market sectors including insurance and finance.

Wall Street watches Non-Farm Payrolls closely. The report affects today's mortgage rates. Among the reasons why is that the Federal Reserve's stimulus programs are linked to the U.S. jobs economy, and the Fed has actively held current mortgage rates down.

October's Non-Farm Payrolls will be released Friday. With a better-than-expected read, mortgage rates and APRs are expected to climb. With a worse-than-expected read, mortgage interest rates are expected to fall.

Click for today's live mortgage rates.

9.2 Million Jobs Added Since 2010, 162k Per Month

The Non-Farms Payrolls report is a broad look at the U.S. labor market. By industry, it shows which economic areas are expanding, and which areas are contracting. It also reports the U.S. unemployment rate.

Non-Farm Payrolls is a monthly Wall Street highlight. Job growth is paramount to economic growth, and economic growth drives investment strategy.

Recently, the jobs report's importance has been magnified. This is because the Federal Reserve is actively stimulating the economy and its programs will continue so long as the economy requires it.

Low mortgage rates spur refinances as well, which increase household savings and contribute to higher levels of consumer spending.

Freddie Mac reports the average 30-year fixed rate conventional mortgage rate at 3.98% nationwide. Rates for VA mortgages and FHA loans are even lower. VA rates average 0.375 percentage points less than a comparable conventional loan; FHA average 0.25 percentage points less.

Many banks are currently offering mortgage rates in the 3s with equally-low APR. Home buyers are buying homes cheaply and refinancing households are saving hundreds of dollars each month.

It's estimated that the typical household using the HARP program to refinance now saves more than 31% monthly. Use the home mortgage calculator to see how much money you can save.

How Jobs Affect Housing, Mortgage Rates

The U.S. labor market is tightly tied to housing. Jobs provide households with income, confidence and capital; and, confident persons are more likely to buy a home or relocate.

Meanwhile, as the number of buyers in a market grows, the supply-and-demand curve shifts, which results in higher prices for sellers and the creation of real wealth. This, too, can boost confidence.

Furthermore, employed persons are also more likely to be mortgage-approved.

Even before your first day of work, you can get a loan via the offer letter mortgage.

It's no coincidence that the labor market's recent rebound  has coincided with a rise in U.S. home values.

Nationally, sales prices are up between 15-20% as compared to earlier this decade with some markets -- including Phoenix, San Francisco and Los Angeles, among other --  rising nearly twice that amount.  

Rising home prices would typically be bad for buyer's purchasing power but 30-year mortgage rates are at their lowest point since June 2013. Home affordability remains near its highest point high in history and homes are selling quickly.

40% of all homes sold in less than 30 days last month. 

With a strong jobs report Friday, mortgage rates are expected rise. You get less house for your dollar when mortgage rates are up. It may be prudent to lock a mortgage rate today.

Click for a quick, live rate quote.

Linking Job Growth To Future Fed Policy

Between 2008-2009, the U.S. economy fell into recession, catalyzed by the failure of Lehman Brothers; the near-collapse of mortgage lending; and the movement of Fannie Mae and Freddie Mac into conservatorship by the Federal Home Finance Agency (FHFA).

7.4 million jobs were eliminated.

Since that period, though, hiring has resumed. 9.2 million jobs have been added back to the U.S. economy -- a 124-percent recovery in terms of "employed persons". The jobs are not of equal pay or stature, but an increase in the number of employed persons is a net-positive.

Furthermore, unemployment rates have dropped, down more than four percentage points.

Should October's job data read stronger-than-expected, the Fed may begin making plans to raise the Fed Funds Rate, which would suggest a strengthening economy and inflationary pressure. This would likely lead to higher mortgage rates.

Analyst calls are for 240,000 net new jobs created in October, with estimates ranging from two-hundred-thousand to two-hundred-eighty-thousand. Consider locking your mortgage rate before the Friday morning release is made.

If the actual reading beats Wall Street estimates, or is toward the top end of that range, mortgage interest rates will likely rise.

Compare Mortgage Rates Now

In September, the economy added 248,000 net new jobs. For October, it's expected to show 240,000. The jobs report releases at 8:30 AM ET. Today's low mortgage rates could be at-risk.

Wednesday and Thursday of this week may be your best chance to get really low rates so compare current quotes now. Rates are available for free with no social security number required to get started, and with no obligation to proceed whatsoever.

Click to get rates now.

The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.

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