Last reviewed July 2, 2015Tweet
Current mortgage rates are markedly higher after the February Non-Farm Payrolls report release.
Two hundred ninety-five thousand persons were added to U.S. payrolls last month, and a net negative eighteen-thousand person revision was removed from the results of the two months prior.
Despite the downward revision, total jobs added last month exceeded Wall Street's expectations. Mortgage rates are reacting negatively.
Freddie Mac put this week's average mortgage rate at 3.75% nationwide. Friday's mini-surge, however, has rates up by about an eighth of a percentage points.
Rates are still near their lowest of all-time, but the "best deals" may be gone. Rates may have already reached their bottom.
Once monthly, the Bureau of Labor Statistics releases its Non-Farm Payrolls report. More commonly known as the "jobs report", Non-Farm Payrolls details employment in the U.S. economy by sector, and demographic.
The release also includes workforce-related data including employment rates, workforce size, and the number of hours worked per week, on average.
According to the government, the U.S. economy added 295,000 net new jobs in November with nearly one-sixth of those jobs coming from food services and drinking establishments. Professional and business services accounted for fifty-one thousand jobs; and, health care employment rose by 24,000.
The U.S. Unemployment Rate dropped two-tenths of a percentage point to 5.5%, marking the sixth straight month in which the Unemployment Rate read below six percent.
Before this streak, the last time joblessness was less than six percent was in July 2008.
Prior to its release, analysts were unsure of what the February Non-Farm Payrolls report would show. Estimates for new job creating ranged from 200,00 to 252,000 net new jobs created. Accounting for the downward revisions to the two prior months, actual job creation exceeded estimates handily.
Furthermore, although most gains are linked to new minimum wage laws which went into effect January 1, average hourly wages improved 0.1 percent, which is linked to higher consumer spending.
Current mortgage rates are higher after the report's release.
The Non-Farm Payrolls report swings a big stick in mortgage markets. Job growth is linked to economic growth, and economic growth is linked to mortgage rates.
Since late-2012, however, the jobs report-mortgage rates connection has been even tighter.
This is because of the Federal Reserve's theory behind its now-concluded third round of quantitative easing -- a program known as "QE3" -- was that low mortgage rates would help to stimulate job growth and the economy.
The Federal Reserve believes low mortgage rates for the 30-year fixed boost homeownership which boosts consumer spending, construction jobs, and the health of tens of satellite sectors.
QE3 ended in October 2014. During the program's 25-month run, the jobs economy grew by an average of 202,000 jobs per month -- a 44% improvement over the same period prior. The national Unemployment Rate dropped two percentage points.
A strong U.S. economy is typically bad for low rates. This year, however, the reverse has been true.
Worldwide economic uncertainty has pushed investors toward the safety of U.S. government-backed mortgage-backed bonds. This type of trading pattern is known as "safe haven" buying and it helps to lead mortgage rates lower.
Freddie Mac's weekly mortgage rate survey says the 30-year fixed now averages 3.75 percent nationwide, the benchmark product's twelfth straight week below four percent.
15-year mortgage rates are even lower.
On the strength of the January's Non-Farm Payrolls report, typically, a bout of safe haven would have been expected to drive rates even lower. However, because the Fed may be ending its support for low mortgage rates, markets are showing concern.
U.S. bonds are selling off, resulting in an increase in mortgage rates. Today's mortgage applicants can still get rate quotes in the 3s with low APRs, but mortgage rates were their best earlier in the week.
Mortgage rates reacted poorly to February Non-Farm Payrolls report. Rates are rising, but still remain near historical bests. It's an excellent time to lock a mortgage rate; or, to consider the refinance of an existing loan.
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