Author bio section
After weeks of worsening rates, it seemed California mortgage rates were getting stable. But the employment report and some other news last week delivered a knockout punch to any hope of rates getting better.
Mortgage rates are directly impacted by how mortgage backed securities(MBS) are traded on wall street. If MBS fall in price, the rates go up. On Monday and Tuesday the MBS fell by 9 basis points (bps) each. Thats only a minor impact on rates. But then on Wednesday and Thursday it went down by a whopping 66 bps. If that wasn’t enough, the employment report on Friday sank the MBS by another 24 bps. That brings the week’s total to a drop of 108 bps.
Such a drop in price of MBS in a week, would translate to an increase in mortgage rates for most programs by 0.25%. A quick glance on mortgage rates published by top banks confirm that. They are all advertising close to or higher than 4.00% APR for most of the mortgage program.
The 10 year treasury note yield also climbed to 2.08%, the highest rate in over a year. The MBS usually trades in the same direction as 10 year note.
The unemployment rate in February declined to 7.7% frm 7.9% and down 0.1% more than thought. Non-farm jobs increased 236,000 ; non-farm private jobs increased 246,000. Non-farm jobs are now at the highest since last November and the unemployment rate at the lowest since December 2008.
The strong employment report also brings the Fed back into focus in terms of ending its Quantitative Easing (QE) sooner than what was thought just 48 hours ago. One more month of strong employment data in March will likely cause the Fed to begin planning in earnest its gradual reduction of monthly Fed purchases of MBSs and treasuries. Fed’s purchases of MBSs is one of the biggest reasons why the mortgage rates have remained low. If the Fed decides to stop or reduce the purchase, there could be a dramatic increase to rates.
If you were thinking of refinancing, time could be running out to get a really low mortgage rate. The mortgage rates would most likely not get better from here. In fact, I see the rates gradually worsening.