Mortgage rates hitting record lows is more about coronavirus uncertainty than a good sign for the housing market
The first week of March, as new cases of the novel coronavirus appeared in more US states and cities, the Federal Reserve cut interest rates by 0.50% to try to protect the economy from the disruption brought on by the outbreak. Mortgage rates are closely linked to the yield on the 10-year Treasury, and as that dropped on the rate cut, mortgage rates fell to their lowest level ever in a history of nearly 50 years.
The same week in early March, mortgage applications shot up by 10% when compared to the previous year, with homebuyers taking advantage of the low rates. But previous weaknesses in the US housing market, along with the massive uncertainty and anxiety brought on by the outbreak, likely won’t lead to many first-time homebuyers getting ultra-cheap new mortgages.
Instead, what we are seeing so far is people who already have mortgages using this opportunity to refinance. Bankrate reported that refinance applications shot up 26% at …continued .
[Source: Business Insider]