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Mortgage Rates Going Up

Mortgage rates moved higher at the fastest pace in more than 3 weeks today, following a much stronger-than-expected jobs report. The Employment Situation is widely regarded as the single most important economic report month in and month out. It always has the potential to move markets–especially interest rates.

Economists and analysts actively attempt to predict the results of the report and the median forecast is generally “priced-in” to markets ahead of time. In other words, high or low job creation, in and of itself, doesn’t push rates higher or lower on the actual day of the report. Rather, it’s the gap between the consensus forecast and the actual result.

In today’s case, the median forecast called for the creation of 180k new jobs while the actual tally was an impressive 255k. Wages also rose at a pace of 0.3 percent versus a median forecast calling for a 0.2 percent increase. That’s important because wage growth is one of the components of the report that can offset better-than-expected job growth.

This particular report was also important because it solidifies a bounce back in job growth from an exceptionally weak reading in early June. The report in early July was strong, but many investors were waiting to see if today’s report would help confirm that June was an anomaly.

Markets instantly reassessed the odds of a Fed rate hike by the end of the year. Before today, traders saw roughly a 30 percent chance of a hike by December. After this morning’s report, the probability leapt to 40 percent. Although the Fed Funds Rate doesn’t dictate mortgage rates, when the Fed is seen as more likely to hike, long term rates like mortgage and 10yr Treasury yields tend to rise.

Most lenders are now back up to 3.5% on conventional 30yr fixed quotes for top tier scenarios, though quite a few remain at 3.375%. Current rates aren’t really the issue though. The risk is that this data helps momentum build toward higher rates in the coming weeks.

Ask our San Ramon mortgage broker about the latest mortgage rates.