Rates Near Record Lows

Dated: 07/15/2016

Views: 874

The most significant economic report of the month contained a big surprise, but it had remarkably little impact on mortgage rates. Over the past week, the main influence continued to be a flight to safety following the British vote to exit the European Union. As a result, mortgage rates again ended the week lower.

In May, the economy added just 11,000 jobs, the lowest level since September 2010. The concerns about the strength of the labor market lasted just one month, however. Against a consensus forecast of 180,000, the economy added 287,000 jobs in June, the highest level since October 2015.

Signs of strength were found in other areas of the report as well. The unemployment rate in June increased from 4.7% to 4.9%, and wages rose at the fastest annual pace since 2009. This month's increase in the unemployment rate is considered a sign of strength because it was the result of a large number of people beginning to look for employment in June.

Defying the usual reaction, mortgage rates did not rise following the upside surprise seen in June's labor market data. The typical response to stronger-than-expected employment data is for mortgage rates to rise due to an increase in the outlook for future inflation. The primary explanation is that post-Brexit demand from global investors for safer assets remains high. Added demand for government-guaranteed U.S. bonds, including mortgage-backed securities (MBS), has helped push mortgage rates near record lows.

Source: MBS Quoteline

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David Sarnowski

David is a seasoned real estate professional, specializing in residential sales, rentals and investment properties. David is a 15 year resident of the New Jersey Gold Coast, with the local knowledge n....

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