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Mixed Bag for Jobs Report

Mortgage Rate Summary 2/3/17

How Interest Rates Move:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

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Rates Currently Trending: Lower

Mortgage rates are moving lower so far today.  The MBS market improve by +16 bps yesterday. This may've been enough to improve mortgage rates or fees.   The market experienced moderate volatility yesterday.



Today's Rate Forecast: Lower

Jobs: Its Big Jobs Friday!

  • Headline January Non-Farm Payrolls 227K vs est of 175K
  • December NFP revised from 156K to 157K
  • November NFP revised from 204K down to 164K
  • Over the past 3 months, NFP have averaged 183K after revisions.
  • The Unemployment Rate moved up from 4.7% to 4.8%.
  • This was due to the Participation Rate moving up from 62.7% to 62.9% which that more people responded that they are looking for work compared to last month.
  • Average Hourly Earnings did increase on a MOM basis by 0.1% but this was lower than the estimates of 0.2%.
  • Average Hourly Earnings on a YOY basis dropped from 2.9%(revised to 2.7%) down to 2.5%.
  • The average work week increased to 34.4 hours from 34.3 hours.

So, what does all of that mean? Well for sure it is a mixed bag. We did see much stronger NFP readings but a sizeable revision lower in November's NFP. We did also see an increase in wages but at a very slow clip.

Services: 2/3 (or more) of our economy is services (non-manufacturing) based. The January ISM reading hit 56.5 which just missed expectations of 57.0. It was the third highest reading in the last 12 months. Anything above 50 is expansionary.

Factory Orders: December U.S. Factory Orders where better than expected (1.3% vs est of 1.0%) and a nice rebound from November's -2.4%.

Geo-political: We have fresh new sanctions on Iran but the market focus on is on a possible executive order that directs the government to review the Dodd-Frank law and look for ways to pare it down.

Today's Potential Rate Volatility: High

So far today mortgage rates have experienced high volatility. Mortgage rates have moved lower today and will likely finish better for the week, but it could get a little bumpy toward the end of the day.

Bottom Line:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

Brian DiVito
VP of Mortgage Lending
brian.divito@rate.com
www.rate.com/briandivito
908-451-4517
NMLS# 274474 

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