Eave’s “Just the Facts” is a weekly series designed to cut through the noise about home loan interest rates for borrowers and real estate professionals. Predictions of interest rate movements tend to be inaccurate, because the events that impact them are complex and unpredictable. Eave doesn’t try to play the role of forecaster, who claims to have some special insight. Few do! Instead, our Chief Credit Officer covers what happened in the market last week.
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Last week, the month of May ended with consumers confident in the economy, their own finances going up, and their personal savings rate falling. June ushered in the new month with a big bang economic data release on jobs added and a falling unemployment rate. These indicators continued the storyline on economic expansion driving more jobs and greater consumerism. Bottom line: The data is not offering any signs for the feds to back down rate hikes. So mortgage rate trends have an rising outlook.
More jobs were added and the unemployment rate fell in May
Employers added 223,000 new jobs in May, with gains spread across industries. The diffusion index — which indicates the number of industries adding jobs relative to the number of industries contracting jobs — improved in May and has been trending up over the past year. Labor is in short supply and will likely push wages higher. The unemployment rate fell to 3.8 percent, which matches the low of the 1991-2001 cycle. There are fewer unemployed left that are actually looking to work and this likely exacerbates the situation.
Zooming back to a 7 decade view on unemployment rate, it is at a trough or close to a trough, which in the past has been followed by a sharp rise in job losses and unemployment resulting in a recession. The next 12 to 24 months will bring plenty of foreboding prognostications which would be amusing at the very least. Economic cycles are natural and nothing to be afraid of. If anything, they bring about a great period of opportunity shortly after a period of storm.
In the meanwhile, consumers are more positive than ever and, driven by that confidence, are not saving as much. Typically consumer sentiment and savings rates are more a reflection of the rear view mirror with hardly a worry about things to come. The more these trends continue, the closer we get to a turn for the worse in the economic cycle.
Our Updated Jumbo Rates * (as of 06/04/2018)
In the meanwhile, our rates went back up to our average levels, which is still as good if not better than the rates banks give for their best customers.
5/1 ARM – 4.125% Interest Rate, 4.672% APR
7/1 ARM – 4.250% Interest Rate, 4.646% APR
30yr FRM – 4.750% Interest Rate, 4.824% APR
* This estimate is informational only. It is not a commitment to lend. To apply for a loan, you’ll need to complete an application and provide additional information. Final approval of your loan is based on verification of your meeting the necessary underwriting criteria and property approval. The estimates for fees and other charges are not intended to be accurate until you have chosen a property and settlement service providers. Rates are estimates. Your final rate, loan product, and terms may be different. Normal credit qualifications and other terms and conditions apply. Products, rates and terms are subject to change unless product has been selected and rate has been locked after you have chosen a property.