What's Ahead For Mortgage Rates This Week : September 4, 2012

04.09.12 03:45 PM By Paul Cantor

Jobs Report In Focus Mortgage markets improved last week for the second consecutive week. With no news coming from Europe, Wall Street was focused U.S. economic data and Federal Reserve Chairman Ben Bernanke's planned public speech from the Fed's annual retreat in Jackson Hole, Wyoming. Rate shoppers and home buyers in Richmond caught a break. The housing market was shown to be improving last week, as was the average household income nationwide -- two events which would have typically moved Virginia  mortgage rates higher. But, because the Fed Chairman used his speech to signal that new economic stimulus may be imminent, mortgage rates dropped. The Fed is expected to launch a bond-buying program that would create new demand for mortgage-backed bonds. Mortgage-backed bonds are the basis for most U.S. mortgage rates and the new-found demand would result in lower rates nationwide. According to Freddie Mac's weekly mortgage rate survey, the 30-year fixed rate mortgage rate fell to 3.59% last week for borrowers willing to pay 0.6 discount points plus a full set of closing costs, where 0.6 discount points is a one-time closing cost equal to 0.6 percent of your loan size. Conventional mortgage rates open this week at a 4-week best. Threats to low rates remain, however.

Date

Time (ET)

Statistic

For

Market Expects

Prior

09/04/12

10:00:00 AM

ISM Index

Aug

50

49.8

09/04/12

10:00:00 AM

Construction Spending

Jul

0.50%

0.40%

09/05/12

08:30:00 AM

Productivity-Rev.

Q2

1.80%

1.60%

09/06/12

08:15:00 AM

ADP Employment Change

Aug

140K

163K

09/06/12

08:30:00 AM

Initial Claims

09/01/12

375K

374K

09/07/12

08:30:00 AM

Nonfarm Payrolls

Aug

130K

163K

09/07/12

08:30:00 AM

Nonfarm Private Payrolls

Aug

145K

172K

09/07/12

08:30:00 AM

Unemployment Rate

Aug

8.30%

8.30%

A European Central Bank meeting is scheduled for Thursday and the release of the August Non-Farm Payrolls report is due Friday. Both events could have negative repercussions on mortgage rates. For example, the ECB is expected to announce new aid measures for some its struggling member nations, including Greece, Spain and Italy. If the aid package "ends" the sovereign debt issues which have plagued the European Union since 2010, equity markets would rally on the news at the expense of bond markets. This would drive U.S. mortgage rates higher as investors dump their bond holdings. Similarly, if the August jobs report is deemed "strong", it would lower the likelihood of new Fed-led stimulus. This, too, would lead mortgage rates higher -- perhaps by a lot. Economists expect to see that 130,000 net new jobs created last month. The jobs report will be released Friday at 8:30 AM ET. Mortgage interest rates remain historically very favorable. This week has the potential to cause increases or decreases in rates depending on the outcomes.  Floating into the data maybe risky.  Now is a great time to avoid the uncertainty of market volatility and take advantage of low rates by locking,