Current mortgage rates¬†are below four percent.
After a neutral¬†January¬†Non-Farm Payrolls report, mortgage-backed securities (MBS) are idling, which is holding U.S. mortgage rates at their lowest point in 10 months..
For home buyers who choose to pay¬†discount points, conventional 30-year fixed-rate mortgage rates are near 3.75%¬†and rates for buyers using a¬†15-year fixed have dropped to near three percent.
Adjustable-rate¬†mortgage rates have dropped after the Non-Farm Payrolls report release, too.
With rates in¬†the 2s, the 5-year ARM can be a strong option for first-time home buyers in search of a "starter home", and other home buyers who may not spend more than ten years in a residence.
If you've been sitting on the sidelines, time may be running out to take action.
There are¬†plenty of reasons to refinance. However, rates remain¬†above their year-ago levels and the consensus among Wall Street is that consumer mortgage¬†rates will rise gradually through 2016.
Looking for the right time to lock a mortgage rate? That time could be now.Click to see today's rates (Feb 11th, 2016)
On the first Friday of each month, the Bureau of Labor Statistics releases its Non-Farm Payrolls report.
More commonly known as "the jobs report", Non-Farm Payrolls gives a detailed look at the nation's workforce. The report includes jobs by sector, average earnings, and the national unemployment rate.
The Non-Farm Payrolls report is among each month's most closely-watched economic releases because so much of the U.S. economy is tied to jobs.
When the labor force is expanding and average wage earnings increase, the economy tends to expands.
As more income is earned by U.S. households, more taxes are paid to federal, state, and local governments. This leads to the purchase of more goods and services by both consumers and governments, which keeps the cycle going.
A strengthening jobs economy also increases the¬†disposable income available in the typical U.S. household, which can boost consumer confidence and personal consumption. This, too, promotes a cycle of strong growth.
Growth begets growth.
Conversely, when job growth is low and confidence is down, consumption tends to drop. In¬†markets like this, less income is earned, fewer taxes are paid, and demand for goods and services falls.
In down markets, businesses have fewer reasons to hire new workers, and they often reduce the size of their existing workforce to something smaller.
This cycle, too, feeds on itself.
Because of the importance of jobs to the broader U.S. economy, economists watch the Non-Farm Payrolls report closely.
Wall Street watches it, too, which is why "jobs"¬†affect your mortgage rate.Click to see today's rates (Feb 11th, 2016)
The January¬†Non-Farm Payrolls report showed 151,00¬†net new jobs created last month -- falling¬†short economist predictions of one hundred-ninety thousand jobs.
November¬†and December Non-Farm Payrolls data were¬†revised higher by a collective 2,000¬†jobs, which lessened the impact of the jobs report falling short of expectations.
So did a sharp rise in worker wages.
Last month, the average worker wage increased 0.5 percent, which lifted the annual increase to 2.5%. Wages have stagnated for a good number of years. Markets are looking favorably upon this number.
Also, the unemployment rate has now reached 4.9%, which is the lowest since February 2008.
The January¬†jobs report, then, suggests that the labor market's pullback last summer may have been an anomaly; that the U.S. economy remains on course for slow, steady expansion.
It¬†also puts Wall Street on notice.
January's¬†Non-Farm Payrolls report re-affirms¬†the Federal Reserve's decision¬†to raise the Fed Funds Rate at the close of last year. It may also¬†keep the Fed on track to raise rates again later this year -- maybe as soon as March.
Remember that the¬†job of the Federal Reserve is to maximize the U.S. labor market while maintaining stable prices throughout the economy and, since the start of the decade, 13.1¬†million jobs have been created. At the same time, inflation rates¬†have remained below Fed targets.
Should job and wage growth continue, the Fed's future rate hike schedule will likely remain intact.Click to see today's rates (Feb 11th, 2016)
Between December 2008 and December 2015, the Federal Reserve held the Fed Funds Rate in a target range near zero percent as a way to catalyze the U.S. economy.
Then, at the end of 2015, the group voted to raise the Fed Funds Rate to a target range near 0.25 percent, noting that future rate hikes were likely so long as¬†economic conditions warranted them.
The January 2016¬†Non-Farm Payrolls report is another move in that direction.
Labor markets are on a run. Unemployment rates are at the¬†lowest levels in 8 years; job growth is at its¬†strongest since the turn of the century; and, wage growth is starting to creep
Without wage growth, there's often no inflation, which presents an issue for members of the Federal Reserve.¬†The Federal Reserve is committed to keeping inflation rates stable within the economy at a rate of near two percent per year.
Actual inflation rates are closer to 1.5 percent.
This difference may not seem like much but consider how these two (major) steps the¬†Fed took to lead¬†inflation to take hold:
Both steps were feared for their ability to push inflation to unmanageable levels. Yet, inflation has yet to take hold.
Additionally, with global economies faltering, investors are seeking safety of principal in U.S. markets. This is causing the U.S. dollar to appreciate in value, which is also working against inflation.
The Fed has suggested that it will raise the Fed Funds Rate hike four times in 2016. With each successive hike, though, inducing inflation becomes less likely because rate hikes slow inflation down.
So, what's a mortgage borrower to do with information like this?
For now, maybe nothing. Today's mortgage rates are low and, although there's no direct link between the Fed Funds Rate and mortgage rates, the Fed can influence the direction of interest rates¬†in the future.
It's expected that January's¬†strong job report will reinforce the "flight-to-quality" which has helped mortgage rates stay low for most of the last few weeks. However, that sentiment can shift quickly, causing mortgage rates to rise.
If you've been putting off a refinance or home purchase, consider moving up your time frame.
The January¬†Non-Farm Payrolls report shows steady economic growth and a solid jobs economy. Eventually, this will affect mortgage rates negatively. Not today, however.
Take a look at today's real mortgage rates now. Your social security number is not required to get started, and all quotes come with instant access to your live credit scores.Click to see today's rates (Feb 11th, 2016)
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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2016 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)