History-Making Mortgage Rates This Week
By Suzanne De Vita
For the first time, the average 30-year, fixed mortgage rate sank to 3.29 percent this week, according to the Freddie Mac Primary Mortgage Market Survey® (PMMS®). The figure is the lowest recorded in the survey, which began monitoring rates in 1971.
The five-year adjustable and 15-year fixed rates tumbled, as well, to 3.18 percent and 2.79 percent, respectively.
In an abrupt decision earlier this week, the Federal Reserve cut interest rates in response to the coronavirus, which is drastically impacting markets worldwide. Despite fixed mortgages moving with Treasury yields, not Fed policy, analysts anticipated a significant slide, as well as broader effects in the housing market, including climbing home prices and refinances, and construction setbacks.
"The 30-year fixed rate mortgage dropped to its lowest level in more than seven years last week, amidst increasing concerns regarding the economic impact from the spread of the coronavirus, as well as the tremendous financial market volatility," explained Mike Fratantoni, chief economist at the Mortgage Bankers Association (MBA), in a recent statement. "Refinance demand jumped as a result, with conventional refinance applications increasing more than 30 percent [this week].
"Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize," Fratantoni said.
"On the domestic front, the super low interest rates will boost housing demand," Lawrence Yun, chief economist at the National Association of REALTORS®, noted in a recent RISMedia story. "There is likely to be some disruptions to home-building supply from the global supply chain production. So one inevitable is higher home prices."
As the busy real estate season shapes up, demand remains strong, with applications for home loans rising roughly 10 percent year-over-year, the MBA reported.
"While purchase applications were down a bit for the week, they are still up about 10 percent from a year ago," Fratantoni said. "The next few weeks are key in whether these low mortgage rates bring in more buyers, or if economic uncertainty causes some home shoppers to temporarily delay their search."
"Mortgage applications increased 10 percent last week from one year ago and show no signs of slowing down," Sam Khater, chief economist at Freddie, said in a statement. "Given these strong indicators in rates and sales, as well as recent increases in new construction, it's clear the housing market continues to be a positive force for the broader economy."