30-year fixed mortgage hits record low

WASHINGTON » 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 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 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. Longterm 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 may 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.

With mortgage rates having declined in recent months, applications for home loans rose jumped 10% from a year earlier in the week that ended Feb. 21, the Mortgage Bankers Association said this week. Applications

for refinancings leaped 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 that 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.