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Will jobs report push rates up?

By Polyana da Costa ·
Friday, March 7, 2014
Posted: 2 pm ET

The February employment report released this morning had mixed news for the economy and for mortgage borrowers.7-good-reasons-for-a-mortgage-refinance-2-rates-lg

The economy gained 175,000 jobs in February, about 25,000 more than economists expected. But the unemployment rate ticked up as more people entered the labor force, the Bureau of Labor Statistics reported Friday.

Sorta good

"This points to ongoing growth but not quite as strong as we would like to see it," says Paul Edelstein, U.S. director of financial economics at IHS Global Insight.

Last November, for example, the economy added 274,000 jobs.

Still, it's all about perspective. Of course 175,000 jobs is not as good as anything above 200,000, but it's way better than, say, the mediocre 84,000 jobs seen in December.

Investors seemed pleased with the latest report. The yields on the 10-year Treasury note increased a few basis points to 2.81 percent after the job numbers came out.

How it affects mortgage borrowers

Mortgage rates tend to follow Treasury yields. That means the February jobs report puts some upward pressure on rates. But don't worry for now. This won't be enough to make rates rise by much.

"Maybe a few basis points on the 30-year-fixed," Edelstein says.

The unemployment rate ticking up from 6.6 percent to 6.7 percent isn't good news, but it won't do much to change the Federal Reserve's mind about scaling back on its bond-buying stimulus program.

The Fed currently spends $65 billion per month buying mortgage and Treasury bonds, which helps keep mortgage rates low. It used to spend $85 billion until it announced it would trim the program at every Fed meeting. The next meeting is March 19. Expect another round of cuts then.

"The Fed is still going to do what it said it was going to do," Edelstein adds.

What will mortgage rates do when that happens? Probably jump higher.

Follow me on Twitter: @Polyanad.

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March 12, 2014 at 11:19 am

Let's hope not, the rates have been declining recently and Americans have been loving that.

March 07, 2014 at 6:36 pm