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| Line chart of 30-year fixed rate mortgage (%) showing US 30-year mortgage rate falls below 3% for first time |
The average interest rate on a 30-year fixed-rate mortgage in the US has fallen below 3 per cent for the first time ever, mortgage finance company Freddie Mac said on Thursday.
The historic figure reflects how policy responses to the coronavirus pandemic have brought down borrowing costs, helping drive a recovery in the US housing market even as other parts of the economy face a more uncertain recovery.
The fresh low of 2.98 per cent — below anything on records dating back to 1971 — was down from 3.03 per cent the previous week.
Doug Duncan, chief economist at Freddie Mac’s sister company, Fannie Mae, said that given the big drop in US Treasury yields, mortgage rates had more room to fall. “A two-and-three-quarters [per cent] mortgage is possible next year,” he said.
The reason rates have not fallen faster is that the demand for mortgage refinancing has overwhelmed the ability of lenders to originate new loans, according to Mr Duncan.
“There is no point in lowering prices to gain business you can’t close anyway,” he said.
It is like past crises, in that those who don’t need financing can get it, and those that need it cannot
- Walt Schmidt, FHN Financial
Source: Mamta Badkar and Robert Armstrong | Financial Times
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