Well, the US Unemployment Rate dropped to its lowest level since 2001, according to the Labor Department. That should be great for the economy, but not good for mortgage rates.
However, when t comes to interest rates, it's all about expectations.
While we added 138,000 jobs to the economy last month, that's less than the 174,000 jobs gained in April. Some analysts have been claiming that our job creation efforts have "run out of steam," because this is fewer new jobs than expected. Job gains for March and April were also revised down.
If you're floating an interest rate, that's good for you.
|Conventional 30 yr Fixed||3.750||3.750||Unchanged|
|Conventional 15 yr Fixed||3.000||3.000||-0.13%|
|Conventional 5 yr ARM||3.000||3.629||Unchanged|
|30 year fixed FHA||3.250||4.206||+0.01%|
|15 year fixed FHA||2.750||3.611||-0.02%|
|5 year ARM FHA||2.875||3.981||Unchanged|
|30 year fixed VA||3.375||3.530||+0.01%|
|15 year fixed VA||2.875||3.181||Unchanged|
|5 year ARM VA||3.250||3.293||-0.01%|
(as of 10:30 am EDT)
Most indicators do not support rising interest rates. They indicate that investor confidence in the US economy is waning
Usually, Monday brings no major data. However, this Monday, we'll get the ISM non-manufacturing index, and April's Factory orders.
Should these rise a great deal, rates could increase, and if they fall (a lot), rates could drop.
However, they are not the most important reports we get each month and are likely to be over-ridden by whatever tweets emit from the White House and other global / political happenings.
If the Employment Report tomorrow follows today's ADP data, we could see a jump in rates tomorrow morning. If it does not, rates could drop. If I could lock a rate I liked today, and I was closing soon, I'd probably do it.
If you're a gambler or can afford to wait for a better rate, you might choose to float. Everyone's goals and tolerance for risk are different.
Mortgage interest rates depend on a great deal on the expectations of investors. Good economic news tends to be bad for interest rates, because an active economy raises concerns about inflation. Inflation causes fixed-income investments like bonds to lose value, and that causes their yields (another way of saying interest rates) to increase.
For example, suppose that two years ago, you bought a $1,000 bond payingÂ five percent interest ($50) each year. (This is called its â€ścoupon rate.") Thatâ€™s a pretty good rate today, so lots of investors want to buy it from you. You sell your $1,000 bond for $1,200.
The buyer gets the same $50 a year in interest that you were getting. However, because he paid more for the bond, his interest rate is not five percent.
TheÂ buyer gets an interest rate, or yield, of only 4.2 percent. And thatâ€™s why, when demand for bonds increases and bond prices go up, interest rates go down.
However, when the economy heats up, the potential for inflation makes bonds less appealing. With fewer people wanting to buy bonds, their prices decrease, and then interest rates go up.
Imagine that you have your $1,000 bond, but you can't sell it for $1,000, because unemployment has dropped and stock prices are soaring. You end up gettingÂ $700. The buyer gets the same $50 a year in interest, but the yield looks like this:
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