Mortgage rates have edged.125%-.25% higher this week.
If it wasn’t for uncertainty regarding the European economy mortgage rates here at home would almost certainly be higher. Investors from around the world have flocked to the “safety” of US-denominated assets, including mortgage-backed bonds (MBS’s) in 2014 in response to the Ukrainian-Russian conflict and weakness in the Euro economy.
The European Central Bank (ECB) responded to this weakness overnight by lowering it’s short-term interest rate (similar to the Fed Funds Rate here in the US) in an effort to support the economy. In response the Euro currency has hit a 4-month low versus the dollar. In the immediate term weakness in Europe is helping US mortgage rates to remain low but in the long-run this will surely unwind.
Here at home all eyes are focused on tomorrow’s all-important jobs report. Last month 288,000 new jobs were announced which was stronger than expected. The market currently expects ~220,000 new jobs for tomorrow’s report. As usual, a number north of expectations would likely pressure mortgage rates higher and vice versa.
One interest rate analyst I particularly like believes a stronger than expected report is already “baked into” rates (as I mentioned earlier rats have risen this week). Therefore, in his opinion if the jobs report is strong rates won’t worsen very much. And if the report fails to beat expectations we would likely see rates improve. I’ll recommend floating into tomorrow’s jobs report.
Current Outlook: floating