Mortgage rates moved higher at the fastest pace in more than 3 weeks today, following a much stronger-than-expected jobs report.  The Employment Situation is widely regarded as the single most important economic report month in and month out.  It always has the potential to move markets--especially interest rates.

Economists and analysts actively attempt to predict the results of the report and the median forecast is generally "priced-in" to markets ahead of time.  In other words, high or low job creation, in and of itself, doesn't push rates higher or lower on the actual day of the report.  Rather, it's the gap between the consensus forecast and the actual result.  

In today's case, the median forecast called for the creation of 180k new jobs while the actual tally was an impressive 255k.  Wages also rose at a pace of 0.3 percent versus a median forecast calling for a 0.2 percent increase.  That's important because wage growth is one of the components of the report that can offset better-than-expected job growth.  

This particular report was also important because it solidifies a bounce back in job growth from an exceptionally weak reading in early June.  The report in early July was strong, but many investors were waiting to see if today's report would help confirm that June was an anomaly.  

Markets instantly reassessed the odds of a Fed rate hike by the end of the year.  Before today, traders saw roughly a 30 percent chance of a hike by December.  After this morning's report, the probability leapt to 40 percent.  Although the Fed Funds Rate doesn't dictate mortgage rates, when the Fed is seen as more likely to hike, long term rates like mortgage and 10yr Treasury yields tend to rise.

Most lenders are now back up to 3.5% on conventional 30yr fixed quotes for top tier scenarios, though quite a few remain at 3.375%.  Current rates aren't really the issue though.  The risk is that this data helps momentum build toward higher rates in the coming weeks.  As such, it makes sense to lean toward locking vs floating until such momentum can be ruled out.

Loan Originator Perspective

July's NFP report beat expectations handily, adding to June's robust gains and sending rates upward.  My biggest concern over today's action isn't our rates now compared with Thursday, it's whether our trend of stable to lower rates is imperiled.  My pipeline was locked up tight, and that move was the right call.  Next week's movement will be crucial, may indicate where we go from here. -Ted Rood, Senior Originator

Hopefully you locked before today as a stellar jobs report has pushed lender pricing to the worse.   At this point, if you floated into this report, I would continue to float into next week.  I do believe we will regain these losses but it will take a little time.  -Victor Burek, Churchill Mortgage

Today's Best-Execution Rates

• 30YR FIXED - 3.375-3.5%
  
• FHA/VA - 3.25%
  
• 15 YEAR FIXED - 2.75%
  
• 5 YEAR ARMS -  2.75 - 3.25% depending on the lender

Ongoing Lock/Float Considerations

• In the biggest of pictures, "global growth concerns" remain the driving force behind the long-term trend toward lower rates

• Amid that trend, periodic corrections toward higher rates can and will happen.  These can happen for no apparent reason, or they can be brought on by changes in expectations surrounding central bank policy at home and abroad, as well as geopolitical and systemic risks
  
  
• Time horizon and risk tolerance are 2 variables to consider when it comes to locking.  If you have plenty of time and don't mind losing some ground, set a limit as to how much higher rates could go before you'd lock to avoid further losses, and then float in the hopes of never seeing that limit.
   
• In the shorter-term, it's always good to look for lock opportunities after rates have been moving lower or sideways repeatedly, especially if they've since begun to move back up in any sort of consistent way. 
   
• As always, please keep in mind that the rates discussed generally refer to what we've termed 'best-execution' (that is, the most frequently quoted, conforming, conventional 30yr fixed rate for top tier borrowers, based not only on the outright price, but also 'bang-for-the-buck.'  Generally speaking, our best-execution rate tends to connote no origination or discount points--though this can vary--and tends to predict Freddie Mac's weekly survey with high accuracy.  It's safe to assume that our best-ex rate is the more timely and accurate of the two due to Freddie's once-a-week polling method).