Mortgages have hit a record low, and there’s a possibility they could fall below 3 percent, government-sponsored mortgage-finance company Freddie Mac reported.
The average rate for a 30-year fixed-rate mortgage fell to 3.07 percent over the last week.
“Mortgage rates continue to slowly drift downward with a distinct possibility that the average 30-year fixed-rate mortgage could dip below 3 percent later this year,” wrote the company in its mortgage rate report.
The downward drift is caused in large part by economic uncertainty surrounding the path the novel coronavirus is charting as it resurges in many states.
“On the economic front, incoming data suggest the rebound in economic activity has paused in the last couple of weeks with modest declines in consumer spending and a pullback in purchase activity,” the report said.
Nervous investors are seeking safer investments and pouring money into government bonds and mortgage debt — much of it backed by Freddie Mac and its sister government-sponsored mortgage company Fannie Mae. Investors are so hungry for security that they are willing accept lower yields, driving the interest paid on bonds and mortgages.
Because bond and mortgage rates respond to similar stimuli, the yield on 10-year U.S. Treasury bonds and mortgage rates tend to move in lockstep. But, as Freddie Mac noted, while the yields for a 10-year Treasury bond have dropped more than a full percentage point this year, mortgage rates have only declined by one-third of a point. Mortgage rates were not able to move downward as slowly because of volume of refinancing requests looking to take advantage of historically low rates clogged the system. As that surge in demand is absorbed, rates are expected to slowly fall back in line with Treasury bond yields.