By Hugh W. Page, www.fallsofficeloans.com

A few weeks ago, mortgage rates jumped significantly higher as investors began to anticipate what they believed to be signals of an improving economy and therefore the corresponding potential for inflation down the road driven by massive government debt and spending. More recently,however, those concerns have dissipated as it appears the overall economy remains weak, even if less so than earlier this year. The Federal Reserve and Treasury have provided no indication that recently announced programs of bond purchases to support the mortgage markets and economy will change in one way or the other and inflation remains largely a down-the-road concern.

As a result, mortgage interest rates have settled back to a lower level, albeit higher than the lows we reached in late spring.

At weeks end the rate on a 30-year fixed-rate mortgage for the best customer (FICO score, down payment, 1% Orig Fee, etc) declined to 5.125% with FHA rates falling to 5.250%, and USDA rates remaining at the 5.50% level.

Yesterday, Thursday, gave us the release of our most important piece of economic data each month, the Jobs Report, as well as a double dose that included weekly jobless claims. After an unexpectedly large improvement in May’s report of a smaller than expected job loss of a 322,000 jobs, the June report showed that 467,000 jobs were lost during the month sharply exceeding expectations. Possibly, this indicates that the May report was an anomaly. The nation’s unemployment rate ticked up to 9.5% during the month the smallest such change since last September when the present downturn began to take hold. The rate itself, however, is the worst since 1983. A larger measure of unemployment, “U6″ that takes in to account disaffected workers, those who have given up looking for a job, or have been forced to work part time when they really need full time work, shows the rate is closer to 17%.

Rates have eased back because the economy has done so. The fact is, if you want substantially lower mortgage rates you’ll need to wish for even slower economic growth, and that’s probably not among the best things to want at this point. It’s very possible that after that late spring low-to-high flare in rates that we’ve settled into a range between 5 and 5.50% for awhile.

Tags: Housing Market, Interest Rates, Local Economy

Posted on Monday, July 6th, 2009 at 12:55 pm and is filed under Mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.