Events and Fluctuating Rates

Economic events drive mortgage rates. The month of November showcased how events drive markets and cause mortgage interest rates to fluctuate.

The employment report released on Nov. 8 showed job growth of 204,000 non-farm payroll jobs created in October. This number was considerably higher than the consensus estimates of 120,000. This good news on jobs was very bearish for the bond market and mortgage rates. On the heels of the employment report were the confirmation hearings for Vice Chairman Janet Yellen who has been nominated to replace the current Federal Reserve Chairman Ben Bernanke. Yellen’s remarks had the potential of moving the markets. If confirmed, Yellen will be the first female Chairperson of the Federal Reserve Bank in its 100-year old history.

In her testimony Yellen stated that the quantitative easing made a meaningful contribution to economic growth. She went on to say that the resulting “lower interest rates have been instrumental” for the growth in the housing sector. Yellen addressed the labor participation rate and the long-term unemployed. She said that there should be special focus on employment and didn’t argue when the point was raised that the employment numbers may be potentially higher due to the slack labor participation numbers. Inflation goals are the same as outgoing Fed Chairman Bernanke. It was reiterated that the rate of inflation is well below the goal of a twopercent inflation rate.

Yellen stated that the quantitate easing program by the Fed cannot go on forever, but she did not signal that the program was ending anytime soon.

The markets liked Yellen’s testimony. After Yellen’s testimony mortgage rates, there was a collective sigh of relieve reflected in the markets after her testimony. Yellen reaffirmed her reputation as someone who has been supportive of Bernanke’s rate and monitory policy. Rates moderated from the higher levels reached after the strong employment report. Rates were basically back to October levels. Jumbo money – which can be used for loan amounts north of $418,000 with 20-percent down payments – has been priced better than comparable super conventional money. Expect rates to keep in a relative narrow range for the near term. Historically, mortgage rates are in excellent shape.

Bill Starrels lives in Georgetown, where he works as a mortgage loan officer. He can be reached at bill.starrels@ or 703-625-7355. NMLS#485021

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Fri, 23 Jun 2017 20:16:24 -0400

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