Why mortgage rates are going up

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The government says unemployment fell as coronavirus restrictions on businesses eased.

The nation's jobless rate dipped last month to 13.3%, from 14.7% in April, the U.S. Bureau of Labor Statistics said Friday. April's reading was the highest since the Great Depression, and analysts were predicting a much worse 19% rate for May.

But instead of losing more jobs, the economy added 2.5 million of them.

"These improvements in the labor market reflected a limited resumption of economic activity that had been curtailed in March and April due to the coronavirus (COVID-19) pandemic and efforts to contain it," the bureau says.

Though 21 million working Americans are still unemployed, you could almost hear the champagne corks popping on Wall Street as the Dow Jones Industrial Average went soaring.

Money poured into stocks and out of bonds, causing bond prices to sink and their yields (interest) to jump. Mortgage rates are going higher, too, because they've been tagging after the Treasury bond yields, says Zillow economist Matthew Speakman.

"After a lingering disconnect, Treasury yields and mortgage rates have recently rekindled their relationship and resumed moving in tandem, thanks in part to enduring stability in the broader financial markets," Speakman says.

But remember that mortgage rates have been at their lowest levels in history, so even if they climb a bit they're still remarkably low.

Use the mortgage calculator below to see the low payment you can expect from one of today's low mortgage rates:

What borrowers should do

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Homeowners and homebuyers should to shop around for a mortgage before rates rise further.

Ahead of the employment news, the nearly 50-year-old survey from mortgage company Freddie Mac put this week's average for 30-year fixed-rate home loans at 3.18%. That was just a couple of notches above an all-time low, and rates below 3% have been cropping up.

In the wake of the improving jobs numbers, borrowers may notice that rates on 30-year mortgages have risen by one-quarter of one percentage point, Matthew Graham, chief operating officer of Mortgage News Daily, told CNBC.

But loan applicants also may notice a more positive development, says mortgage analyst Rick Sharga, president and CEO of CJ Patrick Co.

"More stability in the jobs market might encourage lenders to loosen credit standards slightly, making it easier for borrowers to get loans," Sharga says.

Still, homebuyers who've been looking at houses, and homeowners wanting to save big by refinancing, won't want to waste any time, especially if the economic news continues to look sunny.

"As reports continue to emerge that show the economy may be beginning a modest recovery, suddenly there appears to be upward pressure on bond yields, and thus mortgage rates," says Zillow's Speakman.

To get out in front of possible increases, shop around and compare mortgage offers from a bunch of lenders so you'll find the lowest rate available to you. Different lenders can offer you rates that vary by 1 percentage point or more, a recent LendingTree study found.

When you find a rate that works for you and will give you a low monthly payment, work with the lender to lock it so it won't get away.

Take a look at today's best mortgage rates available where you are:

About the Author

Doug Whiteman

Doug Whiteman

Editor-in-Chief

Doug Whiteman is the editor-in-chief of MoneyWise. He has been quoted by The Wall Street Journal, USA Today and CNBC.com and has been interviewed on Fox Business, CBS Radio and the syndicated TV show "First Business."

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