October jobs report better than expected. What does that mean for mortgages?

Numbers of U.S. jobs created in the past year - figures from the Bureau of Labor Statistics.

An important economic report was released on Friday that had an immediate impact on mortgage interest rates. The U.S. jobs report for October revealed that employers added 204,000 new jobs, well above the 100,000 expected. In addition, the number of job creations for August and September was revised higher by 60,000. The unemployment rate ticked up to 7.3 percent from 7.2 percent and was in line with estimates. The Labor Force Participation Rate (LFPR), a measure of how many people are looking for work, fell to 62.8 from 63.2 and remains at 35-year lows. It's important to note that in a recovery, the LFPR should be moving higher, not lower. Overall this was a good report for the U.S. economy but moved interest rates higher because an improving jobs market can lead to inflationary pressures and signal the end to the Federal Reserve's quantitative easing program.

The Fed's current quantitative easing program continues to help keep home loan rates attractive. The Fed has been purchasing $85 billion in bonds and treasuries each month to stimulate the economy and housing market. The Fed has said that its decision regarding when to taper these purchases will be dependent on economic data. If economic data in the coming weeks is strong, like the jobs report was, the Fed could discuss tapering its purchases in its December meeting of the Federal Open Market Committee. This could have a big impact on home loan rates heading into 2014.

Yet home loan rates remain attractive compared to historical levels and now remains a great time to consider a home purchase or refinance. And perhaps now is the perfect opportunity before interest rates move to higher levels. 

All economic news released last week was not rosy. Consumer spending - the main driver of the U.S. economy - fell to 1.5 percent, the slowest rate in three years. This is one reason the strong jobs report was significant: If consumers aren't confident about their jobs or are out of work or underemployed, spending will continue to be soft. That would not a good sign for the U.S. economy moving forward but may ensure a longer period of low mortgage interest rates.