Rates are bobbing around, and here's why
The government reported on Friday that the nation's unemployment rate fell to 13.3% in May as the economy added 2.5 million jobs, with states coming out of coronavirus lockdowns and businesses reopening.
Analysts had expected a horrific 19% jobless rate.
The Dow Jones Industrial Average rallied on the news, and the celebration on Wall Street helped to lift mortgage rates. The average for a 30-year fixed-rate mortgage jumped from 3.13% to 3.24% on Friday, according to Mortgage News Daily.
Some observers were quick to speculate that the improvement in the job market might lead the Federal Reserve to lift a key interest rate off its current near-zero level much earlier than expected. The Fed slashed the rate on March 15 to give the economy some pandemic protection.
But several experts say it's much too early to be thinking about the end of ultra-low interest rates, including the lowest mortgage rates in history.
Experts: Lower mortgage rates are likely
Just as the jobs report pushed rates higher, something else could easily come along to yank them back down, says Matthew Graham, chief operating officer of Mortgage News Daily.
"It was and still is perfectly valid to believe rates have an equal chance of pecking away at new all-time lows versus embarking on a journey back toward much higher levels," Graham writes.
On Monday, his site's daily survey of lenders found 30-year mortgage rates were already declining: to an average 3.19% (from Friday's 3.24%). By Tuesday, the average was just 3.09%.
Don't be surprised if rates continue to fall, says mortgage analyst Rick Sharga, president and CEO of CJ Patrick Co.
"Based on what's going on in the capital markets (especially the yields on U.S. Treasuries, which tend to dictate mortgage rates), there's actually still room for mortgage rates to go down," Sharga says.
Mortgage rates typically move in sync with the interest, or yield, on the 10-year Treasury note. But the rates on home loans still haven't dropped as sharply as the bond yields, says Danielle Hale, chief economist with Realtor.com.
"As the market normalizes, there's room for the gap to close, and we expect it will do this through a combination of rising 10-year yields and falling mortgage rates," Hale says.
Sub-3% rates are still out there
Though surveys show average rates are still a little higher than they were before that stunner of an employment report late last week, you can still find rates that are well below the averages — even well below 3%.
On its website, United Wholesale Mortgage — one of the nation's largest mortgage lenders — continues to advertise its Conquest mortgage, a 30-year fixed-rate loan with a rate that can be as low as 2.5%. The loan is available through brokers, not directly from UWM.
So, if you're buying a home or are refinancing, ignore the day-to-day economic noise that can move mortgage rates around in the short term. When you gather and compare loans from several lenders you're still likely to find a great rate.
"Mortgage rates are still very close to all-time lows in the bigger picture," says Graham, of Mortgage News Daily. "So there's still time to take advantage of this historic opportunity if you haven't already."