Market Forecast: Mortgage Apps, ADP Employment, and Consumer Credit

Posted On December 04, 2017

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Mortgage rates trended slightly upward last week, ahead of December’s Federal Open Market Committee (FOMC) meeting.  With a low unemployment rate and steady inflation, the FOMC is expected to raise rates once more this year.  The only housing report this week is the Mortgage Bankers Association (MBA) weekly mortgage application survey.  The ADP employment report will come out Wednesday and consumer credit is scheduled for release on Thursday.

For the week ending 11/24, new purchase mortgage applications increased slightly and refinance applications declined.  This data may have been influenced by the Thanksgiving holiday and bank closure on Thursday.  Rate hike speculation has led refinance activity to drop off slightly and new purchase activity to increase.

The ADP employment report is based on data from approximately 400,000 private businesses employing about 23 million workers nationwide.  In October, the ADP employment report added 235,000 jobs.  Unemployment claims have been historically low and the unemployment rate is hovering a low level of 4.1%, indicating the job market is nearing full employment. 

Consumer credit measures the total amount of outstanding credit segmented by revolving and nonrevolving credit.  Revolving credit includes monthly debts like credit card debt.  Nonrevolving credit is comprised of longer term debt like student loans and car loans.  Healthy growth in consumer credit is an indication that consumers are confident they will be able to repay debt, too much growth in consumer credit can signal trouble ahead, as consumers borrow too much to offset lack of wage growth. 

Consumer spending habits and job activity all impact the FOMC’s decision whether or not to move interest rates.  In turn, benchmark interest rate hikes impact mortgage rates.  Even with 2017’s two rate hikes, the mortgage rates remain historically low. 


Sources: Bloomberg, MarketWatch, Mortgage News Daily