The past month has been an eye opener for consumers, banks and any one that is involved in the financial industry. Markets have been changing rapidly mainly on the basis of speculation from Federal Reserve statements. Despite what is happening, the current economic data does not justify higher mortgage rates.

The June jobs report released by the Labor Department showed a gain of 195,000 which was better than expected. This news was interpreted as an economic recovery that is moving full steam ahead. In turn, this also increased speculation that the Feds would begin tapering their bond purchases during the third quarter of this year. Markets rallied and mortgage rates went up. However, taking a closer look at the jobs that were created shows a different story. The reality is that the number of unemployed people remains unchanged at 11.8 million and those employed part time (involuntary part-time workers) rose by 322,000 to 8.2 million. The largest sector of gain was in leisure and hospitality which includes food services and drinking places. Also trending up was employment in amusements, gambling and recreation. Not counted in the unemployment numbers were the 2.6 million people, unchanged from a year ago, who were marginally attached to the labor force because they did not search for work in the prior four weeks. Of that number, 1.0 million were discouraged, an increase of 206,000 from a year ago. Are these statistics really reason to celebrate?

In another report, the Federal Reserve figures showed that consumer borrowing through credit or loans rose in May by the most in a year to the tune of $19.6 billion. The Commerce Department reported that personal spending rose 0.3% in May after a drop of 0.3% during April. The housing recovery, rising home prices and increase in jobs is being credited with the increase in consumer spending. However, the July NAHB/First American Improving Markets Index fell to 255 from 263 in June. In many areas, home price increases are still weak. In fact, the number of underwater mortgages with loan to values above 100% was still 7.3 million at the end of the first quarter 2013. This may be why HARP refinances continue to be on the increase. According to the Mortgage Bankers Association Weekly Mortgage Applications Survey, HARP (Home Affordable Refinance Program) loan applications rose from 34% to 35% for the week ending July 5th. The FHA streamline refinance, similar to the HARP program, also allows existing borrowers to refinance without the need of an appraisal or documentation. Both of these programs continue to help the millions of homeowners who remain underwater. On the other hand, traditional refinance volume may be down because of due rising rates, however, there are still many borrowers who cannot qualify for a refinance at this time.

Looking closer at the data reveals a better picture of what the actual numbers represent. The International Monetary Fund reported that world economic growth will struggle to move ahead this year as the U.S. expansion weakens. Global growth is expected to be 3.1% this year, unchanged from 2012. The IMF also reduced the 2013 projection for the U.S. to 1.7% in April. While Wall Street may be celebrating an economic recovery, consumers still appear to be struggling with low paying jobs or no jobs, high debt and underwater homes. With this in mind, it appears that rising mortgage rates will hurt many people, especially those who are not reaping the benefits of a rising stock market.

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