WASHINGTON (AP) — 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 deepens.
Mortgage buyer Freddie Mac says the average rate on the benchmark long-term loan tumbled this week from 3.45% last week. The new rate marks the lowest level since Freddie Mac started tracking it in 1971, the company says.
The steep decline in the average 30-year rate came in a week when the Federal Reserve made a surprise emergency cut in its benchmark interest rate to try to support the economy in the face of the spreading coronavirus. Investors seeking safety and anticipating further rate cuts by the Fed to address the crisis have poured money into Treasurys and other fixed-income securities that are regarded as safe havens. Long-term mortgage rates closely track the yields on the 10-year Treasury.
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.
Fear and uncertainty about the damage that the virus will ultimately inflict on the U.S. and global economies have escalated. 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.
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 would help support economic growth, which is driven primarily by consumer spending.