Friday, August 05, 2005

Unintended consequences

The Labor Department announced today that job growth in the US economy was better than expected in July. Reuters highlights the figures:

U.S. job growth picked up last month as employers added 207,000 workers to their payrolls, a healthy gain that outstripped Wall Street expectations, a government report showed on Friday.

The unemployment rate held steady at the 2-3/4-year low of 5 percent reached in June, the Labor Department said.

All good news, but with a down-side:

This was the last piece of significant economic data that Federal Reserve policy-makers will have to mull when they meet on Tuesday to set interest rates.

The Fed, which has raised the benchmark overnight lending rate at each of its last nine meetings, is widely expected to bump it up another quarter-percentage point to 3.5 percent next week. Financial markets see the rate at 4 percent by year end.

Wall Street has already indicated that the number is a little "bad news" as far as they're concerned, as the prospect of increased interest rates has the market down to-this-point in the day. Even more specifically though, I wonder what does this mean for me?

As you've noticed, we're buying a new home. To do so of course, we'll be taking a new home mortgage loan. What impact, if any, does today's news have on prevailing mortgage rates?

Mortgage Matters, the in-house blog at had this to say:

The economy grew by a net 207,000 jobs in July, which is quite a bit better than 180,000 expected. The effect on long-term interest rates was not to your benefit. Mortgage rates are rising today.

A key required net yield of Freddie Mac jumped 9 basis points in the immediate aftermath of the release of the employment report. That affects your lender's cost of money. The 10-year Treasury's yield rose to 4.37 percent from Thursday's close at 4.32 percent. The five-year yield jumped to 4.21 percent from Thursday's 4.15 percent.

Look for higher mortgage rates coming to a home loan near you. Great...

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