Mixed News as Bonds and Mortgage Rates Flip Flop

Jobs Report indicates improvement


Last Friday’s Jobs Report indicated surprising results.  Instead of 125,000 job losses that were expected, the Labor Department reported only 11,000 jobs lost in November.  And if that were not enough, the Unemployment Rate improved to 10% – down from 10.2%.  It was also reported that the previous two months were revised to 159,000 fewer job losses than previously reported…strange, how the initial reports can be so skewed.

Stocks were up sharply on the news, but have recently fallen back from comments from Fed Chairman Ben Bernanke.  The Fed Chief commented that inflation will remain low, interest rates will stay low and the economic recovery faces “formidable headwinds”.  After the speech, stocks traded lower as investors sought safe haven of bonds.  Over the past few weeks, bonds had drifted lower, pressuring mortgage rates higher.  However, last few days, bonds have leveled out and mortgage rates remain in good shape.

We can expect these trends to continue into the new year.  It is widely expected that mortgage rates will remain favorable for some time to come.  There will be times of hills and valleys, but the overall outlook for mortgage rates is favorable for the short term.  But, as always, there are many variables that could have sudden impact and change the course of direction:  Should stocks begin to rally or any sign of inflation arise, interest rates will have negative consequences.  Possibly year end profit takers could precipitate a fall in the stock market which would benefit bonds and interest rates.


Reminder:  Fannie Mae changes


Don’t forget about new changes with lending requirements.  Starting  Dec 14th, any new applicants from now on that will not be closing shortly will be held to a maximum 45% debt to income ratio.  Some buyers that were previously preapproved with debt ratios over 45%, will now be ineligible and previous approval withdrawn.

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