Mortgage rates in the U.S. tumbled to another all-time low this week as bond investors reacted to reports showing the economy is struggling amid the COVID-19 pandemic.
The average rate for a 30-year fixed mortgage was 3.13%, down from 3.21% last week, Freddie Mac said in a statement Thursday. It was the second time in two weeks the rate set a new low in a data series that goes back to 1971. The average 15-year rate fell to 2.58%, the lowest in seven years, according to the mortgage financier.
Bond yields, used as a benchmark for mortgage investors, fell sharply last week as investors reacted to news that COVID-19 infections reached record highs in more than half a dozen U.S. states, erasing optimism from the prior week that the nation would recover quickly from the economic contraction the virus caused.
In addition, testimony from Federal Reserve Chairman Jerome Powell to Congress on Tuesday and Wednesday gave a bleak outlook for the economy, adding to the statements he made last week after the Federal Open Market Committee kept its rate near zero.
“The rising incidence of virus is definitely adding more caution to the market, and the Fed had some things to say about the economy that wasn’t encouraging,” said Keith Gumbinger, vice president of HSH.com. “Those two factors took the wind out of the sales of investor optimism, which put downward pressure on interest rates.”
One bright spot in the economy has been the housing market. As buyers emerge from state lockdowns, demand for properties has risen. A seasonally adjusted index measuring purchase applications for home loans jumped to an 11-year high last week, the Mortgage Bankers Association said in a Wednesday report.
“While the rebound in the economy is uneven, one segment that is exhibiting strength is the housing market,” said Sam Khater, Freddie Mac’s Chief Economist. “Purchase demand activity is up over twenty percent from a year ago, the highest since January 2009.”