July 3rd, 2025 2:45 PM by T. Fanning
Happy Thursday! This week’s update is going out a day earlier than normal due to the Independence Day holiday. Have a great and safe 4th!
June’s Employment Report showed a stronger-than-expected job market, with unemployment falling to 4.1% and 147,000 new jobs added—well above predictions. While wage growth was slightly weaker, helping bonds a bit, it wasn’t enough to outweigh the strong jobs data. This likely means the Fed won’t cut interest rates at their upcoming meeting, since the economy doesn’t seem to need support right now. That delay could push mortgage rates higher this summer. Other reports also showed economic strength, including fewer unemployment claims, a sharp rise in factory orders, and growth in the service sector—all signs of a healthy economy, which usually leads to higher rates.
Interest rates wrapped up the week with mixed results—30-year fixed conventional programs saw a modest improvement, while rates for other loan types moved higher.
Next week, a few important economic reports could affect mortgage rates. On Tuesday, we'll get a report on small business optimism and consumer credit, which show how confident business owners feel and how much people are borrowing. On Wednesday, the Federal Reserve will release minutes from their last meeting—this could give hints about whether they're planning to cut interest rates soon. On Thursday, jobless claims will show how the job market is doing, and a few Fed officials will speak, which could also influence market expectations. Finally, on Friday, the federal budget data comes out. If these reports show the economy is slowing or inflation is under control, mortgage rates could drop. But if they show strong growth or high inflation, rates may go up.
We offer traditional Conventional, FHA, VA, USDA, Jumbo. Some of the other programs we offer include: First-time Homebuyer loans; HomePossible and HomeReady programs; Custom term loans; HomeStyle and FHA 203k renovation financing; Construction financing; Chenoa Fund loans (100% FHA financing); Conventional, FHA and VA 1x Close Construction-Perm loans; 1.50% Down FHA Advantage Program; CHFA Financing; Modular and manufactured home financing; 10% down Jumbo loans; DSCR loans; Bank Statement loans; Asset-based loans; Non-Warrantable Condos; Interest Only loans; Lot loans; Second mortgages (fixed or HELOC) on primary, second and non-owner occupied residences; Reverse mortgages; and more! To see a detailed list of programs, visit our website: www.homeloanmortgageco.com/mortgageprograms
Last Updated: 7/3/25
Thursday's bond market has opened in negative territory following a batch of mostly unfavorable economic news. Stocks are reacting to the same data, pushing the Dow higher by 290 points and the Nasdaq up 178 points. The bond market is currently down 14/32 (4.33%), which should cause an increase in this morning's mortgage rates of approximately .125 of a discount point.
Today's big news was the release of June's Employment report that was posted this morning instead of the traditional Friday release because of tomorrow's holiday. The report indicates the employment sector is stronger than expected and again gave us reason to not rely on the monthly ADP report as a gauge. June's report revealed the U.S. unemployment rate slipped 0.1% from May's 4.2% when it was expected to rise to 4.3%. It also showed 147,000 new jobs were added to the economy, exceeding forecasts of 100,000 by a pretty hefty margin.
The report did have a bit of good news for bonds though. Average hourly earnings rose only 0.2% last month while year-over-year they rose 3.7%. Both increases were softer than forecasts of 0.3% and 3.8% respectively. Bonds tend to be more sensitive to the earnings data than stocks, but the other headline numbers are too strong for these readings to offset the negative reaction.
Overall, this data points to a strengthening employment sector, not weakness. It likely all but eliminates the possibility of the Fed cutting key rates at their FOMC meeting at the end of this month. The Fed's two mandates are to control inflation and help maximize employment. This is why we often hear Fed speakers reference the employment sector and inflation. The fact employment is clearly not crumbling at this point undermines the theory that the Fed needs to start cutting short-term rates to support the sector. It more or less buys them more time to see how tariffs and other policies will affect inflation. Making a move now that is intended to boost economic growth when employment activity is stable runs the risk of fueling higher inflation in the future. Therefore, it is highly unlikely they will make a move at this month's meeting, opting for at least September's FOMC meeting before acting. Unfortunately, that probably will contribute to higher mortgage rates this summer.
Last week's unemployment update also gave us a sign of a stronger employment sector by showing 233,000 new claims for jobless benefits were made during the week. Analysts were expecting to see an increase from the previous week's revised 237,000, not a lower number. Rising claims are a sign of weakness in the sector, so good news for rates would have been an increase in new filings.
The third economic release of the morning was May's Factory Orders report at 10:00 AM ET. The Census Bureau announced an 8.2% increase in new orders at U.S. factories for durable and non-durable goods. Despite being a sizable jump, it wasn't far from the 8.0% that was predicted. It is a sign of strength in the manufacturing sector, but was expected due to the large decline in April's orders. In other words, this report has had almost no impact on this morning's mortgage rates.
This week's final piece of data was June's service index from the Institute for Supply Management (ISM). They announced a reading of 50.8 that was higher than May's 49.9 and forecasts of 50.5. The increase means more surveyed service sector business executives felt business conditions improved last month than did in May. More importantly, it moved back above the important threshold of 50.5 that signals growth in the sector. As a sign of strength in the economy, this report is also bad news for bonds and mortgage rates.
The bond market will close at 2:00 PM ET today ahead of tomorrow's Independence Day holiday and will reopen for regular trading Monday. Stocks will close at 1:00 PM and also be closed tomorrow. These holiday hours sometimes create pressure in the bond market as traders look to protect themselves while the U.S. markets are closed for the extended weekend. This may lead to another small increase in mortgage pricing later today.
Since the markets are closed tomorrow and no relevant economic reports are being released, there will not be an update to this report until Sunday evening's weekly preview. We would like to take this opportunity to wish you a safe and wonderful holiday weekend!
If I were considering financing/refinancing a home, I would....
Lock if my closing were taking place within 7 days... Lock if my closing were taking place between 8 and 20 days... Lock if my closing were taking place between 21 and 60 days... Lock if my closing were taking place over 60 days from now...
This is only my opinion of what I would do if I was financing a home. It is only an opinion and cannot be guaranteed to be in the best interest of all/any other borrowers.
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