Mortgage markets in California worsened last week as Wall Street’s renewed optimism pushed equities to their best one-week gain in 2 years. The change in sentiment was bad news for home buyers sensitive to interest rates when investors pored into stocks at the expense of bonds (mortgage debt).
Last week, for the first time since February, mortgage rates rose 5 days in a row. By the time bond markets closed for the 3-day weekend, conforming fixed mortgage rates in Temecula, Corona, and the Riverside area had climbed to their worst levels since mid-May.
Mortgage rates are now at 7-week highs and they are still below 5%…..that’s great news!
The biggest reason for last week’s mortgage rate turnaround is that lawmakers in Greece approved a national austerity plan. Reaching an accord on spending cuts and tax increases was a necessary step for the nation-state to avoid defaulting on its debt and falling into bankruptcy.
Until last week, it wasn’t clear whether the Greek Parliament would reach this agreement, and this fear is why mortgage rates were down through May and June. Fallout from a default would have created global economic uncertainty and uncertainty tends to be good for mortgage rates. Yes, bad economic news is generally good for lowering mortgage rates.
With agreement reached, though, that uncertainty is minimized. Mortgage rates are reversing.
This week, the big news will be June’s Non-Farm Payroll report, set for release Friday morning. If jobs growth is stronger-than-expected, stock markets should continue to post gains and mortgage rates should continue to rise.
The jobs report is a market-mover. If you’re floating a mortgage rate and wondering whether to lock, it may be prudent to lock ahead of Friday’s release.