The old adage that bad news is good news for mortgage rates was true today. Weaker than expected Employment data was bad news for the economy. While the headlines this morning were encouraging about the Unemployment Rate, a closer look at the data revealed the Employment Report fell short in nearly every area.
The consensus forecast was for 175,000 new jobs, but the economy added 169,000 jobs in August. Economists also questioned the quality of jobs being created. The Unemployment Rate fell from 7.4% to 7.3%, but the survey upon which the Unemployment data is based revealed that the decline was entirely due to people dropping out of the labor force rather than job gains.
Today's data may cause the Federal Reserve to wait longer in tapering bond purchases. A prolonged effort by the Fed to purchase mortgage backed securities should help stabilize rates for the short-term.
Rates should be relatively stable going into next week until Friday when Retail Sales, PPI and Consumer Sentiment will be released. Retail sales account for 70% of economic activity and since mortgage rates are directly linked to "economic activity", we could see some turbulence in the market near the end of the week.
Treasury auctions will take place on Tuesday, Wednesday and Thursday and the highly anticipated Fed announcement is on September 18th.
The improvement in mortgage rates today helped gain back some of the earlier week's losses, although we are still higher than we were the beginning of this week. The rate offered by most lending institutions will be approximately 4.75% for a 30-year fixed rate and term.
How rate sensitive are you? For a $150,000 loan, a 1/8th of a percent increase in rate would affect your monthly payment by approximately $11 to $12 per month.