Falling Unemployment Can Eventually Affect Mortgage Rates

The jobs report for September turned out to be quite a surprise as improving job numbers were reported by the Labor Department. According to the data, employers added 114,000 jobs during the month of September. In addition, payroll numbers were revised to show an additional 86,000 jobs created during July and August. These numbers resulted in a decrease of 0.3% and sent the latest unemployment rate down to 7.8%, which is the lowest level in four years.

This upbeat news was another positive sign for consumers, as well as, businesses. On the other hand, consumers need to watch these numbers carefully if they are interested in purchasing a home or obtaining a mortgage refinance. Rates are at new historic lows at this time, partially due to the Fed's latest QE3 plan.

Just several weeks ago, the Federal Reserve announced QE3, the Feds most recent move for monetary easing. With this action, the Feds will be purchasing up to $40 billion of mortgage backed securities each month in order to keep rates down. This plan is already in place which can be seen by the low mortgage rates that are now available. These low mortgage rates are bringing on a surge in mortgage applications, especially mortgage refinances, as can be seen for the week ending September 28th when the Refinance Index soared to 83% of all applications. Still in effect, there are several mortgage programs available aimed at helping borrowers obtain a refinance to lower mortgage rates. The HARP 2.0 program is available for borrowers who have conforming mortgages that were sold to Fannie Mae or Freddie Mac prior to June 1, 2009. This program does not require an appraisal and was further enhanced for underwater borrowers with the removal of loan to value caps. Also still available until the end of 2013, the FHA streamlne refinance with no cash out has drastically reduced upfront and annual mortgage insurance premiums for borrowers who have loans that were endorsed prior to June 1, 2009. This FHA program also does not require an appraisal or any other documentation. For borrowers who are eligible for either of these special mortgage programs, the current low mortgage rates only enhance the benefits even more.

According to the Feds, there is no time limit right now for purchasing MBS which will continue until the unemployment rates falls to around 7%. While there is no telling how long it will take for unemployment to reach the level necessary to end QE3, it could come as a surprise, just as this most recent drop did. Watching these unemployment numbers becomes significant because if and when QE3 ends, consumers may find that mortgage rates may begin to increase back to normal levels.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at about a 1 point origination fee.