Mortgage rates slide to record low of 2.98% on 30-year loan

Mortgage rates are bottoming out.

The average for a 30-year fixed-rate loan has fallen to 2.98%, falling below a psychological threshold that could fuel demand for housing even more.

Rates have fallen to their lowest level in nearly 50 years of record keeping by Freddie Mac for the third week in a row and the seventh time since the coronavirus outbreak began to shake financial markets.

The drop came as the Federal Reserve keeps its benchmark rate close to zero and buys mortgage bonds as part of its plan to stimulate the economy.

Low rates have supported house prices and helped the housing market weather better than expected amid the economic fallout from the pandemic.

“It is not a silver bullet for the economic difficulties that we are living in, but it is day and night different from what the housing market looked like during the last recession,” said Ralph McLaughlin, chief economist of Haus, a co-investment platform for home buyers.

Falling borrowing costs have led to a flood of refinancing applications and new purchase loans as a wave of millennials come home.

The drop below 3% could prompt even more Americans to apply for loans, said Mark Vitner, senior economist at Wells Fargo Securities.

“It’s psychologically important,” Vitner said. “For people who don’t know mortgage rates are low, this should sound the alarm bells.”

In May, when the Federal Reserve started buying low-coupon mortgage securities, analysts predicted rates could drop below 3%. Now there is speculation the slide could go on.

This week, JPMorgan Chase & Co. chief executive Jamie Dimon said the costs of creating and managing loans, including rules and regulations, kept rates high.

“We have been very consistent that mortgages, believe it or not, are much more expensive than they should be,” Dimon said on a conference call.

Despite demand driven by low interest rates, risks abound in the housing market. With the credit standards tightening in the middle high unemployment and fears that the economic recovery may stall, that some potential buyers may not qualify for debt or may struggle to find homes in their price range.

Additionally, the pandemic is peaking across much of the country, with a second wave expected this fall. And Congress may not extend the $ 600-per-week increase in unemployment benefits that is expected to end this month.

This could hamper what has been a relatively strong housing market, McLaughlin said.

“Ultimately, the evolution of the virus will dictate the evolution of the housing market and the economy,” he said. “Housing will not be immune from a double dip recession.”

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