The Atlanta Journal-Constitution
30-year rate hits record low as virus spurs race to safety
Fed’s benchmark rate cut steers investors to haven of Treasurys.
The average rate on a 30-year fixed mortgage has hit a record low of 3.29%, driven down by investors shifting money into the safety of U.S. Treasurys as the coronavirus outbreak has deepened.
Mortgage buyer Freddie Mac said Thursday 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 fall in long-term mortgage rates came in a week when the Federal Reserve made a surprise emergency cut in its benchmark interest rate to aid 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.
With mortgage rates having declined in recent months, applications for home loans jumped 10% from a year earlier in the week that ended Feb. 21, the Mortgage Bankers Association said this week. Applications for refinancings leapt 224%.
“Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until (virus) fears subside and rates stabilize,” Michael Fratantoni, the association’s chief economist, said in a statement.
On Thursday, Freddie Mac’s survey of loan rates showed the average rate on a 15-year fixed mortgage sliding this week to 2.79% from 2.95% last week. The 15-year rate is now at its lowest level since 1991.
The 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 the central bank has cut rates between its regularly scheduled policy meetings since the 2008 financial crisis.