Mortgage buyer Freddie Mac said Thursday that the average on the benchmark 30-year loan tumbled this week from 3.45% last week. The new rate is the lowest since Freddie Mac started tracking it in 1971, the company said.
The tumble in long-term mortgage rates came in a week when the Federal Reserve made a surprise emergency cut in its benchmark interest rate to support the economy in the face of the spreading coronavirus. Investors seeking safety and anticipating further rate cuts by the Fed have shifted money into Treasurys and other fixed-income securities that are perceived as safe havens. Long-term mortgage rates tend to closely track the yields on the 10-year Treasury.
Lower mortgage rates potentially could help lift the housing market, a key pillar of the U.S. economy. More people could find home purchases affordable. And more existing homeowners could decide to refinance to lower rates and free up cash to spend. This trend could help support economic growth, which is driven primarily by consumer spending.
On Thursday, Freddie Mac's survey of loan rates showed that the average rate on a 15-year fixed mortgage sliding this week to 2.79% from 2.95% last week.
The World Health Organization has urged all countries to focus on combating the virus. The latest figures show that there are now roughly 17 times as many new infections outside China as in it. To date, the virus has infected nearly 97,000 people and killed over 3,300.
The Fed's surprise decision this week to cut its key short-term rate by a sizable half-point was an effort to shore up consumer and business confidence and prevent a potential downturn. The central bank's rate cut, which tends to influence many loans for corporations and individuals, was its largest since the 2008 financial crisis. Most investors and economists expect the Fed — and other central banks around the world — to follow up with further rate cuts in the coming months.
The unexpected rate cut by the Fed amounted to a sizable half-percentage point. It was its first move since last year, when the Fed reduced its benchmark rate three times. It was also the first time that the central bank has cut rates between its regularly scheduled policy meetings since the 2008 financial crisis.
Chairman Jerome Powell warned that the virus “will surely weigh on economic activity both here and abroad for some time."