Rates for 30-year US mortgages plunged to a record low on Thursday, forced lower by Covid-19 fears as the US economy could be nearing recession as investors continued to make a mad dash into treasuries.
The average rate on a 30-year fixed-rate mortgage was 3.29%, down from 3.45% last week and the lowest in nearly five decades, Freddie Mac said in a statement Thursday. The last time rates were this low, it was November 2012 at 3.31%.
A quick drop in mortgage rates could boost home sales, but a fast-spreading virus that is starting to take a toll on West Coast cities could prove otherwise. From business shutdowns to quarantines to a collapse in air travel, the economy is rapidly slowing as people load up on food and masks to weather a possible pandemic.
Matthew Pointon, a US property economist at Capital Economics Ltd., told Bloomberg that mortgage rates would probably extend declines before hitting a floor.
We noted on Wednesday that plunging rates has led to a massive refinance boom.
Mike Fratantoni, MBA's senior vice president and chief economist, said:
"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. Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize."
Quicken Loans said they saw "record-setting" volume on Monday and Tuesday as rates fell. CEO Jay Farner said:
"The way that we leverage technology to communicate with our clients, to make it easy for them to make a mortgage application, for our underwriters, we can scale very quickly, which helps us when we see increased volume like this."
Lewis Sogge, a senior loan officer at Freedom Mortgage, said the decline in rates is fueling an epic refinancing boom. Sogge said, "mortgage rates are lower than I thought we'd ever seen. Everyone is working overtime to handle the new loan supply. Its utter mayhem."