Prospective Sacramento area home buyers and current home owners looking to refinance should be considerably more concerned about where mortgage rates are going, since mortgage rates spiked this week after a brief reprieve last week. The move higher seems to signal that rates are on a trajectory to go up.
Conventional and Government (FHA and VA) lenders set their rates based on the pricing of mortgage-backed securities, which are traded in real time, all day in the bond market (mortgage rates loosely follow the yield on the 10-year U.S. Treasury bond). This means rates or loan fees (mortgage pricing) moves throughout the day, affected by a variety of economic and political events. When the price of mortgage-backed securities goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up. Tracking these securities real-time is critical.
The May unemployment rate increased from 5.4% to 5.5%, non-farm jobs increased 280K, versus the consensus estimate of 225K, and private jobs expected to be up 215K actually increased 262K. The average hourly earnings expected up 0.2% increased 0.3%. All of this is very negative for mortgage rates.
Good jobs news is good for the economy, but usually bad for mortgage rates. Yesterday, Greece took the path of delaying any required payments this month until the end of the month. Talks continue, the ebb and flow seems to change daily and will likely be that way through the end of the month. The obvious question, when the end of the month comes what will happen?
The mortgage-backed securities market is down significantly this morning on the better than expected jobs numbers which is pushing rates higher. Unfortunately the market is not only extremely volatile, but it’s headed in the wrong direction.
The average rate on the popular 30-year fixed mortgage is now up three-eighths of a percentage point since mid-May to about 4.125%. While three-eighths may not sound like a lot, it’s not the actual number, or the $40 or $50 more on the monthly payment, but the new trend higher.
It’s more of what it’s going to look like, where we’re going. Is it a train that’s not stopping? When we see an eighth, a quarter, now it’s starting to become typical language. We would normally see a little bit of a pullback, and then it goes up again, and now that’s not happening. We’re slowly steadily increasing.
Take a look at what the experts say in this video and article http://www.cnbc.com/id/102733866.
If you are considering buying or selling a home in the Sacramento area, or have general questions about financing a new home or refinancing your current home, please feel free to contact me at your convenience with any questions.