According to the Residential Finance Corporation's (RFC's) Mortgage Market Review—which tracks leading economic indicators and offers an outlook on their expected effect on the mortgage market and housing sector—the significant decrease in the jobless rate and increase in the number of jobs created in September will likely cause a slight, short-term uptick in mortgage interest rates.
“The numbers will not, however, affect the Federal government’s recent commitment to purchase $40 billion of mortgage-backed securities, monthly, for the near term,” said RFC Chief Market Strategist and Mortgage Industry Expert Barry Habib. “The economy is not showing a significant enough improvement, making these asset purchases critical to helping the industry, and economy, move forward. The expected short-term volatility and rate increase will be just that—short-term—as we expect to see rates settle back to current lows driven by the Fed’s asset purchases.”
The Department of Labor & Statistics has reported that the unemployment rate has dropped by 0.3 percent to 7.8 percent and 114,000 jobs were added during September.
“This significant decrease in unemployment is not likely to have an impact on the overall economy until and unless the decrease were to become a trend with continued improvements over another two-to-three months,” Habib said. “Earlier this week, we correctly recommended to our customers that they lock at the current, low rates prior to the jobs announcement. This proved to be a great recommendation that served our customers well. For those who haven’t yet locked in a rate—there is still time. We actually expect long-term rates will likely move lower in the future due to the continued asset purchase and the commitment to keep the Fed Funds rate low.”
Habib encourages consumers who are still on the fence regarding refinancing to start the process in the next couple of months in order to take advantage of the still historically low rates.
Habib is vice president and chief market strategist at RFC and a frequent speaker on financial markets, housing, negotiation, sales training, building relationships, technical trading analysis and staying motivated at industry events and conferences.