Mortgage Rates Boosted By Solid Jobs Report - Construction Jobs Suffer

Buoyed by the strong employment figures for September that were released last week, mortgage interest rates rose slightly in all categories according to Freddie Mac's Primary Mortgage Market Survey for the previous week.

It is interesting that, with the exception of the short-term ARM, rates were virtually identical last week to the rates one year ago.

The 30-year fixed-rate mortgage (FRM) increased to an average 6.40 percent with an average 0.4 point from 6.37 percent with 0.5 point during the previous week. One year ago the average interest rate was also 6.37 percent.

The 15-year FRM averaged 6.06 percent, three basis points higher than the week before. Fees and points were unchanged at 0.5. Last year at this time the 15-year also averaged 6.06 percent.

The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) carried an average contract interest rate of 6.12 percent compared to 6.11 the week before. Fees and points dropped from 0.6 to 0.5. One year ago the rate was 6.10 percent.

The biggest change in rates belonged to the one-year Treasury-indexed ARM which increased 15 basis points over the previous week to an average of 5.73 percent. Points declined to 0.6 from 0.7. One year ago the one-year ARM averaged 5.56 percent.

While the federal jobs report had a preliminary estimate of 110,000 new jobs created in September, there was no good news for the housing industry. Construction jobs fell by 71,000 and general and specialty trade contractors and remodelers saw 93,000 jobs disappear during the month.

Frank Nothaft, Freddie Mac vice president and chief economist noted that, in addition to the strong September jobs report, earlier figures for July and August "were revised upwards by a total of 188,000 jobs, reflecting greater strength in the economy during that time than initially indicated.

"Meanwhile, following the release of the September 18th minutes of the Fed's Open Market Committee (FOMC) meeting, financial markets reassessed the likelihood of another rate cut at the upcoming October 31st meeting. The market currently is looking for about a 30 percent chance of a 25 basis point rate cut rather than the 50 percent chance that they had previously expected."

The Mortgage Banker's Association has published the following average contract interest rates for the previous week. The 30-year FRM averaged 6.40, unchanged from one week earlier. The 15-year FRM increased from 6.03 to 6.09, and the 1-year ARM was at 6.17 percent, two basis points higher than the previous week.

Mortgage application activity increased a seasonally adjusted 0.7 percent from the previous week and the same from the volume recorded during the same week in 2006.

Refinancing represented 45.3 percent of all mortgage applications compared to 46.2 percent one week earlier. The market share of ARMs fell yet again from 13.6 percent the week ended October 5 to 13.5 percent last week.

Adjustments to all figures were made to account for the short business week occasioned by the Columbus Day holiday.