Mortgage rates again hit record highs

Below is an excerpt from of our latest Market Trends newsletter, Keith Gumbinger’s weekly examination of the economic conditions that influenced mortgage rates. Sign up to receive the Market Trends in your inbox Friday evening.

Just when you think there is sufficient clarity as to where we’re going economically, and that you’ve got a firm grip on how the Fed is likely to act, along comes a piece of data or two which derails both of those trains of thought.

U.S. Treasury set record highs last week

In a week where all the economic data suddenly seemed too strong or stronger relative to recent trends, investors continued to shift money out of bonds, driving yields and mortgage rates higher. At one point, the yield on the influential 10-year U.S. Treasury topped the 3 percent mark, more than a two-year high and nearly double yields of a year ago this week.

And then, with a thud, came the August employment report.

Fewer folks than was hoped for were hired in August, too. The Commerce Department reported Friday that just 169,000 new hires took place during the month, a figure which fell short of forecasts and our own expectations. Perhaps worse, was that some 74,000 jobs originally reported in June and July disappeared in the monthly revision, leaving labor markets rather weaker than had been thought.

Mortgage rates back at record highs’s broad-market mortgage tracker found that the overall average rate for 30-year fixed-rate mortgages (conforming, non-conforming and jumbos) returned to multi-year highs, rising by the same seven basis points (0.07 percent) it declined the week ending August 30 to again hit 4.75 percent.

The overall average rate for 15-year fixed-rate mortgages (conforming, non-conforming and jumbos) added six basis points (0.06 percent), climbing to 3.82 percent, the highest such figure since July 2011.

Popular FHA-backed 30-year fixed-rate mortgages climbed a full 10 basis points, returning to 4.36 percent, while the overall 5/1 Hybrid ARM moved by a four hundredths of a percentage point to a relative bargain of 3.45 percent for the week.

Employment report’s impact on mortgage rates

In a typical “good news is actually bad news” situation, the nation’s rate of unemployment moved down another tenth of a percent to 7.3 percent for the month. However, that decline came not from increased hiring but rather from another decline in the nation’s labor force, which slipped to 63.2 percent of the eligible population, a post-recession low.

One feature of the soft employment report is that it cut the legs out of the rise in mortgage rates, at least for now, as daily rates eased back on Friday. That said, we harbor no illusions that mortgage rates are poised to decline greatly, but they should steady a bit as we move into this week. The most significant new data comes out later in the week, with measures of prices, retail sales and consumer moods all due. Rates will probably be steady to slightly higher again next week, but the climb may be slow and the move small.

HSH Associates Financial News Blog

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