Mortgage Blog

Mortgage Rates Rise Due to Suprising Employment Figures

Good news on the jobs front is not good news for people applying for mortgages, but the news is not anything would-be homeowners should find too discouraging.

Mortgage rates, at a record low just a week ago, spiked to 3.24 percent after a report by the US Bureau of Labor Statistics that the job rate had fallen unexpectedly to a still-high 13.3 percent. The 3.24 percent rate actually represents an increase of 3.51 percent, because the previous week’s rate was negative.

Low rates had helped a big spike in mortgage applications earlier this year. Until this week’s unexpected jobs news, Americans were applying for home mortgages at a rate 18 percent higher than in 2019. Analysts do not expect the record number of home mortgage applications to fall even after the rate jump because there is so much pent-up demand. Mortgage lenders have been on a hiring spree to keep up with the surge of new applications, just these four big lenders adding 13,500 jobs in the first quarter of 2020. J. P. Morgan Chase and Wells Fargo told reporters for CNBC that they are also hiring.

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Given the volatility in the economy, analysts believe, it is still possible for rates to turn lower yet again. Rates are still historically low. They are giving buyers purchasing power, even at this level.

Also in the last week, mortgage bailouts have fallen to their lowest level since the beginning of the pandemic, according to numbers from Black Knight, a mortgage data provider. The number of homeowners in coronavirus relief programs dropped last week by 34,000. This number includes borrowers in both government and private label forbearance programs.

Mortgage relief applications had experienced a steep rise in April that began to flatten out about May 1. This is the first drop since the start of the pandemic. There are still 4.73 million loans in forbearance that represent over $1 trillion in mortgage capital and nearly 9 percent of all active mortgages. The overwhelming majority of these loans are backed by FANNIE-MAE, FREDDIE-MAC, VA, and FHA paper but this is partially offset by an increase in forbearance on bank-held and privately held mortgages.

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Another sign for concern is that in April nearly half (46 percent) of mortgage holders who went into forbearance programs ended up making their monthly payments after all, but in May that percentage fell to less than a quarter (22 percent) of borrowers in those programs.

Where does the market go from here? Although the Bureau of Labor Statistics admits that there has been a mistake in calculation that may understate true unemployment figures by about 3 percent, it appears that unemployment numbers of 1932 and 1933 levels is off the table for now. Whether the employment figures are really lagging or leading indicators, it appears that the layoffs of March and April were not permanent. Unemployment figures may continue to fall, and mortgage rates may continue to rise, when retail establishments around the country are reopened. But for the immediate future, borrowers can expect a rate increase of just one-quarter percent. 

Please call our office at 239-514-2674 for a rate quote, alternately you can apply now for a fast loan prequalification!

 

Disclaimer: This content is for informational purposes only. Our blog is an opinion about current market conditions. NMLS #1743702 Rates, Programs, Guidelines are subject to change without notice.

 

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