Saturday, October 06, 2012

Positive Job Report Causes Uptick in Mortgage Rates

The September jobs report hit at 8:30 AM ET Friday and mortgage bonds immediately worsened, eventually closing the day at their worst levels in two weeks. This is in part because economic growth is inversely linked to mortgage rates, and in part because of the Federal Reserve's QE3 program.
The link between job growth and mortgage rates is fairly straight-forward :
  • When more people work, more income is earned and more taxes are paid  
  • When more income is earned, consumer spending tend to rise; when more taxes are collected, government spending tends to rise
  • An increase in spending results in more sales, more services, and the need for more jobs
Job growth can be a self-reinforcing cycle; one that leads to economic growth and, in general, when the economy is improving, mortgage rates tend to rise. That said, today's rates are still very close to their wll time lows. As of Saturday AM, our Zillpw calculater at right has updated to 3.23%.
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