The average rate for a 30-year conforming fixed-rate mortgage fell to a record low of 3.1%, on Thursday, according to data from Optimal Blue.
It came after a rocky ride that saw rates jump to a one-month high on the previous Friday, the day the government issued a report saying the jobless rate fell in May.
That rosy data – which didn’t give a true picture of the jobs market, according to the government department that issued it – sent investors piling into the stock market and sent bond yields soaring. Higher bond yields mean higher mortgage rates.
Then, reality set in. COVID-19 cases soared to new highs in states like Texas, Florida and Arizona, a few weeks after aggressive measures to reopen their economies.
There was a “misclassification error” in the way laid-off workers were counted, the footnote said, including a “large number” of people who were classified as “employed but absent from work” when they should have been counted as unemployed.
If those people had been correctly counted, the May unemployment rate “would have been about 3 percentage points higher than reported,” the Labor Department said.
In other words, rather than falling to 13.3%, portraying a labor market on the mend, the unemployment rate would have risen to an all-time high of 16.3%.
“To maintain data integrity, no ad hoc actions are taken to reclassify survey responses,” the report said.
Once investors realized the labor market wasn’t as rosy as the headline number suggested, mortgage rates tumbled about a quarter of a percentage point to Thursday’s all-time low, according to Optimal Blue data.
Bad economic news sends investors piling into the perceived safe haven of the bond markets to snap up Treasuries and mortgage-backed securities. That cranks up competition for fixed assets and, thus, shrinks yields.
If you’re a mortgage applicant who locked your rate on the day of the report or shortly after, as rates spiked to a one-month high, you might want to think about calling your lender to ask about re-lock options.