My Mortgage Blog

There seem to be two different reactions to the employment data for September. The first reaction, heard most widely when the data had just been released, was that the number of jobs in our nation grew at a better clip than had been anticipated. Indeed, it was rather heartening.
The second, heard most widely after investors and analysts had lived with the figures for a couple of days, was that the jobs market is flat. A total of 103,000 new jobs just isn’t enough to move the economy significantly forward.
Both reactions are correct. Perhaps what we have here is a glass-half-full/glass-half-empty puzzle. Perhaps, further, it is worth taking any positive news that comes down the pike seriously these days.
The average fixed-rate for Freddie Mac 30-year mortgages, meantime, fell to a record low of 3.94%. As long as there have been Freddie Mac loans, they have never been available with a mortgage interest rate this low. Two concerns are unavoidable, despite the fact that this is such good news for anyone who is seeking financing or refinancing for a home. First concern: We are almost certainly reaching the cellar floor for mortgage rates. It would appear that the only thing with the ability to drive rates still lower would be an out-of-control crisis in (probably European) debt problems. With talk of a “managed” debt default for Greece, finally acknowledging that the country is insolvent and unlikely to pull itself out of the black hole of debt, the world is bracing for the next shoe to fall.
Second concern: Rock-bottom mortgage rates have had little effect on home sales. Even the effect on refinancing loan volume has become briefer in duration, a momentary spike. Since interest rates tend to fall further on bad economic news, there seems to come a time when the benefits of falling rates are often erased by the problems that caused rates to decline again.
This being so, we are less inclined than usual to get excited about new record lows for mortgage rates. Rising rates would likely mean that the economy is firming—or, at the last, the real estate market is improving. So we are in the odd position of tentatively hoping for an uptrend for interest rates.
We are also compelled to watch Europe very closely, because uncertainties about how (and whether) the EU’s leaders will handle the debt fiasco (that certainly reaches beyond Greece) are keeping world financial markets in constant turmoil. Note the editorial comment in the October 9 Financial Times:
“Europe’s monetary union is at the centre of a financial hurricane now closer than ever to tearing through the world economy and inflicting damage for years to come. The eurozone’s challenges are hardly insurmountable. The policies needed to end the crisis are hard, but feasible. Europe is on the brink because it is unable to muster the political will to do what it must.”
Muster away, Merkel and Sarkozy and Cameron. Now is the time for political courage.