Mortgage rates could move higher beginning tomorrow morning. The Bureau of Labor Statistics releases its February jobs report at 8:30 AM ET.

Home buyers and rate shoppers would be wise to take note. The jobs report is almost always a market-mover.

Consider last month.

Although net job creation fell well-short of expectations in January — just 36,000 jobs were added — the national Unemployment Rate dropped to 9.0%, its lowest level in 2 years. The marked improvement surprised economists and sparked inflationary concerns within the investor community.

This, in turn, caused mortgage rates to rise.

In the days immediately following the jobs report’s release, conforming rates jumped 0.375 percent. That’s equivalent to a mortgage payment increase of $22 per month per $100,000 borrowed.

A similar spike could occur tomorrow.

Wall Street scrutinizes job growth because with more working Americans, there’s more consumer spending, and consumer spending accounts for 70% of the U.S. economy. A blow-out number tomorrow would change expectations for the future, and lead rates higher again.

The economy shed 7 million jobs between 2008 and 2009 and has barely made 1 million of them back. Tomorrow, analysts expect to see 183,000 jobs created. If the actual reading is lower-than-expected, mortgage rates should fall and home affordability will improve.

Anything else and mortgage rates should rise. Likely by a lot.

Therefore, if you’re shopping for a mortgage right now, consider your risk tolerance. Once markets open tomorrow, you can’t get today’s rates.

Mortgage markets improved to their best levels of 2010 last week, aided by events half a world away and ongoing safe haven buying.  Greece’s debt problems continue to help mortgage rate shoppers in Oak Park and around the country.

Conventional mortgage rates dropped last week, ARMs falling more than fixed. FHA mortgage rates also improved.

Global concern for the Greece Situation are so strong that markets even shrugged off April’s blowout job report. On most other days, mortgage rates would soar on better-than-expected jobs data — especially coming out of a recession.

The Department of Labor’s April Non-Farm Payrolls reports:

• Payrolls have been net positive for 4 straight months
• Nearly 600,000 jobs have been created thus far in 2010
• Monthly job growth posted its biggest gain in 4 years in April

Additionally, more than 800,000 Americans re-entered the workforce in April in search of work.  As a result, the Unemployment Rate jumped by 0.2 percent — another positive sign (in a roundabout way).

But again, Wall Street wasn’t watching jobs — Wall Street was watching Greece. And Greece was in riot.

This week, without much new data due on the economy, mortgage markets should continue to take cues from Greece, the IMF and the Eurozone.  If a bailout agreement can be reached that investors feel is effective, the safe haven buying that’s led rates lower will recede and mortgage rates should rise.

Conversely, if an agreement is reached that investors deem ineffective, or no agreement is reached at all, mortgage rates should drop.

Each week for the last four weeks, we’ve talked about Greece and its pending bailout and how it might impact rates because each week the bailout appears imminent.  Even this week, the market opens with the news that the IMF has approved a $40 billion lifeline to Greece.  Maybe this will be the news that finally turns the mortgage market around.

Mortgage rates are unnaturally low right now and should change direction quickly. The problem is nobody knows when that will happen so be careful when rate shopping and keep an eye on the market.

Mortgage rates may fall further, but when they turn higher, they’re going to turn quickly.

FHA loan rates took one on the chin again last week.  That’s two in a row and last week was bad each trading session, although there weren’t many surprises.

Hot economic data, a holiday-shortened week, and the end of the $1.25T Federal Reserve purchase program all contributed.

The FHA interest rate hit its highest levels since late-December.

Jobs move economies.  They also move mortgage rates.  Last week, the economy saw some very positive news related to jobs and mortgage rates lost a bit:

1. “Temporary Employment” — a leading jobs indicator — is up 313,000 in the last 6 months
2. The average work-week and factory overtime both rose in March — a sign that hiring should increase soon

FHA Loan Rate Predictions – This Week

This could be another crazy week.

First, the Fed is in an emergency meeting today to review the Discount Rate policy.  The market is on edge waiting for results.

Second, we’re in a really odd spot and technical trading patterns could take over mortgage rate direction for a few days and the influence on the FHA loan rate could be staggering.

Unlike fundamental trading in which markets move on data and projections, technical trading is how markets move based on patterns over time. The two methods co-exist on Wall Street but, occasionally, technical forces can be pronounced, leading markets to lurch up or down.  This week may be one of those times.

Mortgage pricing is far below its 200-day moving average, resting slightly north of a key support level. If pricing worsens this week and bonds fall below the support level, mortgage rates could easily tack on quarter-percents or more per day until the market refinds its balance.

Overall, it’s a week you don’t want your rate to be floating.   Sure, rates could improve, but there’s a lot more room for them to worsen.

Mortgage markets tanked last week and the FHA interest rate saw its highest levels in a month.  Wednesday was the bad day and saw the worst sell-off in over six months.

The major concerns are tied to the current mess in the EU and worries of how our federal debt will impact rates.  The best time to lock a conventional or FHA mortgage rate last week was Tuesday morning.

Predictions for FHA Mortgage Rates This Week

This week, markets should remain volatile. There’s a large set of economic data due for release, plus trading volume will thin as the week goes on because markets are closed Friday for Good Friday.

Coincidentally, Friday is also the day that the March jobs report is released.  Growth is forecasted for this report, a net gain of 187,000 in March.  This is a large number as compared to last month’s net loss of 36,000 job. However, analysts are already dismissing March’s numbers as skewed by both the bad storms of February, and the temporary hiring of Census workers.

In most months, major job growth would be bad for mortgage rates.  This month, that won’t be the case. It will take a figure north of 200,000 to cause rates to rise and the higher the actual number, the more that rates will respond.

Also this week, on Wednesday, the Federal Reserve’s $1.25 trillion program to support mortgage markets sunsets. Fed insiders estimate that the program dropped rates 1 percent since its inception in 2008. It’s reasonable that FHA mortgage rates will rise after its end.

The FHA interest rate improved again last week.

Light volume and steady gains all week.  Then the better-than-expected jobs report on Friday took back much of the week’s gains.

Rates were best Thursday afternoon, but it was still the second consecutive week in which the FHA interest rate fell.

FHA Loan Rate Predictions For This Week

More volatility.

There are not many economic reports with just Consumer Confidence and Retail Sales due out.  A status quo for rates would be great.  Any change is significantly more likely to drive rates up than push them down.

The ticking clocks for this week are two-fold and completely outside of normal mortgage rate factors:

• The end of the Fed’s support of the mortgage bond market
• Potential resolution on the EU / Greece bailout discussions

We’ve had almost all of $1.25T supporting mortgage rates for the past year.  That’s ending.  The Fed has been a buyer of epic proportion.  Rates will go up if no one else has an appetite for that many mortgage bond investments.

We’ve had a huge influx of foreign money in the past few weeks.  It’s helped push the FHA mortgage rate lower and stocks higher in the same week.  That’s not normal.  That’s because foreign investors felt the US was safer than anywhere else.  If the Greece issue finds resolution, expect rates to jump.

FHA loan rates have improved over the past few weeks, but tomorrow’s jobs report could send them much higher.

The official report is the “Non-Farm Payrolls” report and it is one of the most widely watched economic indicators.  Wall Street watches this report and it is usually a driver for some of the most volatile days of the year.

Tomorrow at 8:30 Eastern, we start what will likely be a volatile day.   Expectations are for a net job loss of around 30,000.  More might push the FHA loan rate a little lower, anything less could send rates much higher very fast.

Jobs drive the economic recovery.  Employed Americans spend more and default on mortgages less.  Positive readings on the job market draws money out of mortgage bonds and into stocks.  When that happens, mortgage rates go higher.

Mortgage rates hit the streets around 9:30 EST so expect tomorrow’s rate sheets to reflect the results of the jobs report.  Today’s rates are incredible and have the potential to jump much higher with only a slightly better than expected result.

Mortgage rates improved in spite of quite a bit of good economic news last week.  FHA mortgage rates continued a three-week trend towards lower rates.

Any or all of these three things should have pushed rates higher:

1. The Federal Reserve said the economy continues to strengthen
2. Consumer Confidence pushed to a 2-year high
3. 4th Quarter domestic output exceeded Wall Street’s expectations

What kept rates down was a report from Standard & Poor’s that said U.K. banks are no longer counted among the world’s most stable.  This triggered investors to move money into the US Dollar and helped prop up the mortgage bond market.

This week is loaded with data as well.  Monday is inflation day.  Wednesday is the ADP Challenger Report, and Friday is the government’s Non-Farm Payroll data.

The biggest predictor of FHA interest rates this week will be Friday’s report.  If the jobs data is better than expected, rates will jump.  If the report reveals weakness, rates might inch lower.

We stand a much greater chance of seeing higher rather than lower rates at the end of the week.