The U.S. economy has recovered the 8.7 million jobs that it lost during the recession, shows the May employment report released Friday.
Employers added 217,000 new jobs, about what economists had expected. The unemployment rate stayed at 6.3 percent. These are all good signs for the economy and it marks the fourth straight month with job growth over 200,000.
Normally, such positive news would put upward pressure on mortgage rates as investors feel confident enough to bet on riskier investments, pulling money out of U.S. Treasury and mortgage bonds.
But that doesn’t seem to be the case so far, thanks to Europe.
Thanks, European friends!
The European Central Bank on Thursday announced that it is cutting interest rates in the euro zone and reducing the deposit rate paid to banks to negative. In other words, banks will have to pay the ECB to park their money there, instead of earning interest on it. The measures are an attempt to fight deflation.
Investors are not fans of the measures and the United States seems to be benefiting as it is still perceived a safe haven. As foreign investors seek the safety and better returns of U.S. bonds, bond yields tend to fall. That's good for mortgage rates.
In the current global economy, what the European Central Bank does can have as much impact on mortgage rates here as the actions of the U.S. Federal Reserve, says Cyndee Kendall, sales manager for the Northern California region for Bank of the West.
The ECB's move may help hold rates down, even with a positive jobs report, she says.
If you are in the process of applying for a mortgage, it's a good idea to grab the deal you have now. This European gift may not last long.