Mortgage rates jumped last week in the wake of positive economic signals like job creation and wage gains.
According to Freddie Mac’s weekly mortgage rate survey, the 30 year fixed rate jumped a full 10 basis points from 3.59% to 3.69% compared to the previous week. The 15 year also moved up from 2.92% to 2.99%. Rates are lower than this time last year as the 30 year fixed rate mortgage came in at just above 4.25%.
The unemployment report for January was released on January 6 and the markets are still feeling the effects. The Labor Department reported that 257,000 new jobs were created. For all of 2014, more jobs were created overall compared to any year going back as far as 1999. Yes, we went through some turbulent times but still there can be no doubt the jobs market is back in a sustained recovery mode.
Interest rates are taking a hit as funds are moving more into equities and less into bonds.
There are several economic reports released this week yet none should really have that much of an impact. We’ll get a sneak peek on inflation with the Producer Price Index. Investors are anticipating a decrease in wholesale prices by -0.4%. Retail inflation will be reported next week and the Fed is seeking to get the number closer to its 2.0% annualized target rate. In short, inflation isn’t a problem.
Last week, the Dow closed above 18,000 for the first time since December 31, 2014 and the S&P 500 is bumping the 2,100 mark. The price of oil appears to be stabilizing somewhat near the $60 per barrel mark with Brent Crude trading above $61 last Friday. The precipitous fall in the price of oil is good for consumers at the pump but too selloff yields a damaged energy sector and layoffs. In this way, falling oil can contribute to falling rates.
What investors are hoping for is a happy medium where the price settles at equilibrium favorable to both consumers as well as oil revenues. For the next week or so, investors will keep a close eye on this dynamic as interest rates follow along.