Mortgage Rates Ticking Up - Time to Get Off the Fence?

brianoconnell

The economic news has been so dour lately that nobody expected a huge upswing in the employment market. But that's exactly what happened last Friday, when the U.S. Labor Department reported a gain of 2.5 million jobs across the country in May. 

Meanwhile, the unemployment rate sank to 13.3% from 14.7% (analyst estimates had predicted the unemployment rate climbing to 20% for the month.)

While economists and pundits squabble about the accuracy of the jobless numbers - not surprising during an election year - the mortgage market is responding to a surprisingly stronger economic outlook by boosting interest rates on home purchases higher.

In fact, mortgage rates rose three days in a row after the robust jobs report last week, as news of a speedier economic recovery translated into an upward trend for mortgage interest rates - for now, at least.

“Last week’s news of unexpectedly positive jobs reports and lower unemployment from 14.7% in April to 13.3% in May pushed the NASDAQ to nearly recoup all its losses for 2020, and mortgage bonds are now above the 100-day moving rate," says Nicole Rueth, branch manager at Colorado-based Fairway Independent Mortgage Corporation. "The U.S. Treasury’s 10-year yield is expected to move back to where it was when rates spiked the week of March 19th to 3.625%."

“As the economy recovers, I expect interest rates to rise with it," Rueth adds. "However, there is a long road to full recovery and we need to expect swings in mortgage interest rates."

According to Rueth, last week’s job recovery was an encouraging sign of how quickly the economy may bounce back, but most of the gains were of temporarily lost positions and furloughs returning in the hospitality and entertainment industries. "Jobs weren’t created, they’re just returning - with fewer hours - and new jobs may not be as available for people who permanently lost their jobs," she notes.

Consequently, any mortgage interest growth rate likely won't be sudden, but will grow gradually as the U.S. economy gathers momentum.

“The Federal Reserve is buying mortgage-backed securities and is rumored of instituting a yield curve control soon, which will indirectly keep rates low, thus benefiting home buyers and owners who want to refinance," says Rueth. "Additionally, the positive economic news is bringing back jumbo, renovation, and non-QM loans, as well as state down payment assistance programs, which should benefit local housing markets.”

While that's good news for the U.S. economy overall, it's not exactly a sign that mortgage rates will skyrocket anytime soon.

Still, if you're in the market for a new home, or want to refinance your current one, letting rates climb even a quarter of a point makes that home buying experience more expensive. 

Your best move? If you're serious about buying a home, and find a good deal, go ahead buy now. 

If you're in tire-kicking mode, however, keep right on kicking until you find the home and the rate deal that meets your unique needs.