As the Fed holds rates steady, mortgage rates drop to a new all-time low
The Federal Reserve is keeping a key interest rate at an all-time low — which is helping to push mortgage rates to new lows.
Rates on home loans have plummeted to a new record: an average of less than 3.25% for 30-year fixed-rate mortgages, according to a long-standing survey.
Homeowners have been in a frenzy to refinance and reap big savings, and now more homebuyers joining the party. Lenders say thanks in part to historically low mortgage rates, buyers are submitting more mortgage applications than they have in weeks.
The Fed says that because of “sharp declines in economic activity and a surge in job losses” from the coronavirus pandemic, it’s keeping its benchmark interest rate near zero, matching the bottom that was reached during the 2008 economic crisis and the Great Recession that followed.
Experts say interest rates — including mortgage rates — are likely to stay down for a long time, potentially years.
As the Fed stands firm, mortgage rates drop
The Fed has it decided to keep its target for what’s known as the federal funds rate at a range of between 0% and 0.25%.
The central bank slashed the rate to that ultra-low level last month as the severity of the coronavirus crisis was becoming clear.
Things aren’t getting better, Fed policymakers say.
“The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term,” the officials said in their statement on Wednesday.
One day later, mortgage giant Freddie Mac announced that rates on home loans took a big slide this week — to a record-low average of 3.23% for a 30-year fixed-rate home loan, from 3.33% last week%.
The company’s survey has been keeping track of mortgage rates since 1971.
It was the second report this week to find rates at a new low. The Mortgage Bankers Association, or MBA, says rates fell to a lowest-ever average of 3.43% in its weekly survey.
With rates so attractive, mortgage applications from homebuyers jumped 12% last week and reached their highest level in about a month, the MBA said.
Meanwhile, homeowners are refinancing into lower rates to slash their interest costs and their monthly payments.