The mortgage interest rate has dropped to its ever-low level

Its 30-year fixed-rate mortgage fell to an average of 3.29% during the week ending March 5, a significant 16 basis point decline over the previous week, it reported Freddie Mac, Specializing in the mortgage market

The last time this type of mortgage reached an unprecedented low was in November 2012 following the recession that then occurred. Then the average rate dropped to 3.31%. The 15-year fixed-rate mortgage has fallen 16 basis points to 2.79%, and its variable-rate mortgage has fallen by just two basis points, to an average of 3.18%.

Mortgage interest rates have so far declined throughout 2020, largely in response to concerns related to the economic impact of the outbreak of the Corona virus that began in China and spread to the rest of the world. “Little is known about this virus and its potential impact on people’s lives and economic activity,” Zillow economist Matthew Spickman said. “He’s here, and he will continue to be the deciding factor in mortgage changes in the coming weeks.”

As a rule, mortgage interest rates track the yield of 10-year Treasury bonds, which fell below 1% for the first time ever this week, after the Federal Reserve announced it was cutting interest rates in response
To the possible economic impact of the spread of the virus.

While mortgage interest rates have fallen following U.S. bond yields in recent weeks, the gap between the two has widened somewhat. Banks are now hesitant to cut interest rates at a rapid pace for a number of reasons, according to economists, for example, because they have to maintain their profit margins and do not want to cut their income too much as a result of the interest rate cut.

The decrease in mortgage interest rates has led to a significant increase in mortgage refinancing and the replacement of a previous loan with new under improved conditions. This is what Sam Khater, chief economist at Freddie Mac, noted: “Mortgage applications rose 10% last week compared to the same period last year and show no signs of slowing down.”

Many banks have reached the limit of their ability in terms of the number of applications they can handle. Although various banks have hired more workers in response to growing demand, they are afraid to find themselves over-staffed when rates finally rise again. “They don’t know how long these lessons will last,” said Tendai Capidze, senior economist at Lending Tree.

Photo: Shatterstock