Mortgage rates retreated last week before turning around and moving upward after the release of the February jobs reports. According to Freddie Mac, the 30 year fixed rate averaged 3.75%, down a respectable five basis points from the previous week’s 3.80%. The 15 year mortgage dropped from 3.07% to 3.03%. Then Friday morning rolled around and the mortgage markets took it on the chin.
Mortgage rates jumped at least one eighth of one percent on Friday alone.
The unemployment report released last Friday morning was surprisingly strong, at least in terms of job growth. In February, there were 295,000 new jobs, 55,000 more than were expected. The unemployment rate also dropped lower to 5.5%, although this can also be attributed to a shrinking pool of workers as the labor participation rate hit a 36 year low.
Stocks didn’t like any more than mortgage bonds as the Dow shed nearly three hundred points closing below the 18,000 mark after hitting a record high earlier in the week. The retraction comes in fear of an interest rate hike this June by the Fed due to the unexpectedly strong jobs numbers. Inflation shouldn’t be a problem and in fact it might be a problem even getting to the Fed’s 2.00% target rate as commodities, especially oil, have kept a drag on prices. Slow wage growth will also contribute to lower prices as lower wages won’t allow producers to increase prices at either the wholesale or retail level.
So far this week, it looks like rates are falling, compensating for Friday’s fallout. Investors were reminded that the Eurozone is still in bad shape. While that’s bad news for the global economy, it does help keep U.S. mortgage rates in check.