While the 4th of July had a lot of fireworks going Bond and Home loan rates mis-fired.
Mortgage bonds went even lower last week causing average home rates to rise about .125%
Their were a variety of reasons this happened one being that the Bank of England which is alot like our Fed announced that there average interest rates were going to 5.75% which is their highest rate in 6 years. In comparison our Fed Funds Rate is at 5.25%.
It's important to remember that our US bonds compete globally and for investment dollars and they seek the highest rate for their return so higher rates in other Countries can take money out of our Bond market.
Slowing demand for a product usually causes prices to decline that is why this caused Bond prices to move lower and home loan rates to go up.
The Us Job report showed that there were 132,000 new jobs created in June and 75,000 new jobs were created last month. The unemployment remained at 4.5%. This "good news" gives the Feds reason to be concerned over wage inflation. What this means as employees are paid more they will continue to spend on goods and services which tends to drive up prices of consumer products with additional demand.
Employers that have to pay higher wages to employees may have to raise the price of their own goods and services to help them maintain profitable. The idea of inflationary concern will continue to keep the idea of a rate cut by the Feds on the side for now. These concerns could continue to drive inflation causing Bond prices to lower and home rates to increase.
Information Courtesy of Shawn Gerhardson with Homestead Mortgage .
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