The average U.S. rate for a 30-year fixed mortgage fell to 3.15% this week, the lowest ever recorded in a Freddie Mac data series that goes back almost five decades.
The rate fell from 3.24% last week, setting a new record low for the third time in three months, according to the report.
Mortgage rates have fallen after the Federal Reserve began buying mortgage-backed securities to stimulate demand, said Chris Low, chief economist of FHN Financial in New York. The Fed has purchased more than half a trillion dollars of MBS after restarting in March a bond-buying program it used during the financial crisis more than a decade ago.
When the initial plan of buying $200 billion of MBS didn’t lower financing costs, Fed Chairman Jerome Powell said on March 23 the central bank would buy whatever was needed to move rates. It worked.
“The Fed is by far the biggest player in the mortgage markets right now, the biggest buyer of mortgages, and because of that, they have almost complete control over the interest rate,” Low said.
That means the central bank has the ability to stimulate home sales by driving rates to lows that most people wouldn’t have thought possible a few years ago, said Low.
“Every economist had doubts about how housing would fare during COVID-19, but what we’ve seen has been absolutely remarkable,” Low said. “Home sales are holding up extraordinarily well, and that’s in large part because of the mortgage rates.”
Last week, applications for mortgages to purchase homes gained for the sixth consecutive week to a level that was 6.7% higher than a year ago, when the U.S. was having a normal “spring homebuying season”.
A seasonally adjusted index measuring purchase applications jumped 9%, the Mortgage Bankers Association said in a report on Wednesday. The so-called purchase apps were up 54% from early April when most U.S. states were under lockdown orders to keep people at home in an effort to stem the spread of COVID-19.
Source:Housing wire
