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European Central Bank action spurs stocks to multi-year highs, mortgage rates rise only slightly

The Dow is trading at its highest level in five years, the Nasdaq set a 12-year high, and the S&P 500 reached a four-year high after the European Central Bank’s Thursday announcement of a bond-buying plan to help stabilize the unbalanced sovereign debt situation of its member nations. Investors remained engaged with equities even after Friday’s troubling jobs report put a damper on enthusiasm about U.S. economic strength. Typical of the current market, the bad news actually helped support higher stocks, as investors speculated that it could increase the probability that the Fed will take more drastic measures to intervene into the economy (read: Quantitative Easing).

Thursday’s ADP jobs report showed 201,000 jobs added to payrolls in August, an encouraging number. Then, Friday’s non-farm August employment report showed just 96,000 jobs added, about 40,000 short of expectations and well below the target rate of 200,000 needed to lower the unemployment number. As is, unemployment fell from 8.3 percent to 8.1 percent, but that was due to workers leaving the work force (not any payroll expansion).

Mortgage Rates responded by creeping upward by about a 1/4 of a point, but they are still well below the mid-August price spike. We might have seen a much sharper increase due to the stocks improvement, but caution over the U.S. economy has kept interest in U.S. bonds high and yields relatively low. As we have discussed before, the lower the bond yield, the better for mortgage rates (generally). For some perspective, we ran through the last month of rate changes for the most popular fixed-rate mortgages over on our website. For more (including the weekly rates) see HERE.

We have the 30-year fixed at 3.250 percent (3.321 percent APR) and the 15-year fixed at 2.750 percent (2.773 percent APR), which are gains of .020 percent APR and 0.008 percent APR respectively.

Keep your eyes and ears open for the September 12 and 13 Federal Open Market Committee (FOMC) meeting, which will feature Fed discussion about further quantitative easing. The markets will most certainly move. In what direction? We couldn’t say.


[NOTE: APR is subject to increase and terms subject to change. APRs may very depending on loan details such as points, loan amount and loan-to-value, your credit, property type and occupancy. Closed rate and APR assume a rate and term refinance of a single family detached owner-occupied primary residence, loan amount $417,000 ($561,200 for high balance), and a minimum FICO score of 760. Situations vary based on applicant].

Written by Central Coast Lending - Go to Central Coast Lending's Website/Profile