Market Comment
Mortgage bond prices finished the week near unchanged which kept rates flat. Rates rose, fell, and then rose again in seesaw trading throughout the week. Personal income rose 0.2% as expected. Spending rose 0.4% versus the expected 0.3% increase. PCE inflation rose 0.1% as expected. Dallas Fed President Kaplan said the Fed was looking for a “healthy margin above” 80,000 to 125,000 new jobs each month. This caused a spike in rates Tuesday morning. The rate increases reversed Thursday in response to a Bank of England rate cut and higher than expected weekly jobs data. Weekly jobless claims were 269K versus the expected 264K. The employment report Friday (see results below) resulted in another rate spike. Mortgage interest rates finished the week near unchanged despite the volatility.
Strong Payrolls The payrolls component of the July employment report was sharply higher than expected. Non-farm payrolls rose 255,000 versus the expected 185,000 increase. Mortgage-backed security prices fell as a result which put some upward pressure on rates. The data supports the argument that the Fed may raise rates before the end of the year as some Fed officials have hinted.
Historically there has never been a better time to get a mortgage than now. Rates were around 8.87% in 1976, skyrocketed to over 18% in 1981, were around the 10% mark in 1990, fell to 8% in 2000, saw another drop to near 6.5% through the mid-2000s, and since 2008, thanks to the Fed, rates continued to fall and now remain near historical lows. Now is a great time to take advantage of these low rates.
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