Attention Mortgage Shoppers: Lock Rates Before Tomorrow’s Jobs Report

Few would disagree that economic recovery depends most heavily on jobs and housing recoveries. That’s why tomorrow’s Bureau of Labor Statistics report on December’s unemployment rate and jobs gained/lost is so important—and why rate markets will react wildly to it. Private payroll provider ADP’s December report was three times expectations and caused rates to rise almost .25% in one day, and while ADP isn’t a very reliable predictor of the BLS numbers, remember that the November BLS report was awful. So if you throw in some holiday retail hiring, albeit artificial, the December BLS report has a good chance of coming in at expectations of +150k non-farm payrolls.

The bet a mortgage shopper makes is whether rates will rise or fall on a big report like this. As rate shopping goes, if you’re ready to transact (i.e., you’re refinancing and have all your docs ready to go, or you’re buying a home and are already in contract) and you’re satisfied with your rate, then lock the rate. If you’re facing a bet as to locking today or floating a rate into tomorrow, no market decision is easy, but the safe bet is to lock ahead of tomorrow’s jobs report. Because if the report comes in above or even at expectations, rates will rise. Rates rose wildly on the less reliable (but higher than expected) ADP jobs report yesterday. Today markets recovered just slightly and now it’s eerily quiet as markets await BLS data. Rates rise when bond prices drop in a selloff and you don’t want to get caught in that storm tomorrow if jobs are stronger than expected.