Upward Trends in Economy Bring Mortgage Rates Up

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After the Federal Open Market Committee (FOMC) ended its two-year quantitative program, mortgage rates have started to increase this week. Investors are encouraged to put money in high risk assets as a range of labor indicators show a growing economy. The number of stable jobs available and the unemployment rate reported on Friday could either strengthen or weaken that view. According to the director of U.S. Financial Economics for IHS Economics, Paul Edelstein, creditors mortgage rates have stabilized at a justly low level due to the growing economy.

Economic Hopefulness

According to the Federal government, the nation’s monetary value of all finished goods and services introduced a healthy annualized rate of 3.5 % in this year’s third quarter. The nation’s economic growth is indicated by a large drop in the unemployment rate of the country which was seen to drop to its lowest level last week from April 2000 last week. Another growth indicator was the increase in solid job gains that caused consumer confidence to rebound strongly in October to its strongest in seven years. On November 3, another positive sign was seen in the manufacturing sector for the month of October. Indicators showed that factory activity its August performance which was known to be the best activity shown since March 2011.

According to David Cary, mortgage broker of C2 Financial Corp. in California, a balance can be observed from the favorable conditions that happened two weeks ago. At a low point in the stock market, a lot of money entered the Treasuries and pushed mortgage rates down. Compared to previous month’s figures, rates remained unchanged. Rates, however, were observed to be a quarter-percent higher as compared to figures from two-weeks ago.

Ended Stimuli

Owing to an improved economic outlook, the FOMC concluded its two-year bond-purchase program which was designed to help the economy expand by providing low interest rates. Further, the Federal Reserve maintained its expectations in their statement that the federal rate should remain low for a considerable amount of time and should remain as the standard rate for consumer and corporate loans.

The fast rate of economic growth determines the speeding up or the slowing down in the increase of the federal funds rate. Moreover, the employment update report by the Labor Department on Friday that featured an increase in the number of jobs available for the month of October is also a positive sign.

Not a Good Market for Refinancing

According to the Mortgage Bankers Association, the total amount of refinance applications dropped to 6 percent from the previous week, with the total volume of mortgage applications pegged at 2.6% lower. While this appears to be a bad sign for refinancing, the outlook is more optimistic as the housing market heads into the winter season. A 3% increase in purchase applications was noted during this period.

Moreover, according to the training and development manager for Northern Mortgage Services in Grand Rapids Michigan, Pava Leyrer, rate shoppers are becoming less this year compared to a year or two ago. According to him, lenders are more worried about timing and how fast a loan can be closed.

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