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Mortgage Rates Hit a Record Low -- Again

07/02/2020 | 01:29pm

By Orla McCaffrey

Mortgage rates fell to their lowest recorded level Thursday, weighed down by fears that the U.S. economy's recovery will be held back by new coronavirus outbreaks.

The average rate on a 30-year fixed-rate mortgage fell to 3.07% from 3.13% last week, mortgage-finance giant Freddie Mac said. It is the fifth time this year rates on America's most popular home loan have hit a new low.

"Incoming data suggest the rebound in economic activity has paused in the last couple of weeks with modest declines in consumer spending and a pullback in purchase activity," Sam Khater, chief economist at Freddie Mac, said in a statement. It is possible rates could fall below 3% this year, he said.

Increased capacity to process purchase mortgages and refinancings is likely spurring lenders to lower rates, said Ralph McLaughlin, chief economist at Haus, a home-finance startup. Earlier this year, falling yields on the 10-year Treasury, which is closely linked to mortgage rates, prompted a surge in demand for refinancing. The demand overwhelmed lenders and kept rates from falling further.

Low mortgage rates typically boost home sales, but the cheap borrowing costs have so far done little to blunt the pandemic's effect on the housing market. The spring is usually the busy season for home sales, but buyers stayed home this year. Existing-home sales fell 9.7% in May from the prior month and 17.8% in April, according to the National Association of Realtors.

Should that trend reverse, historically low rates could aid the recovery. The housing market accounts for between 15% and 18% of the U.S. economy, according to the National Association of Home Builders.

"The housing market is going to be a sail, not an anchor, to the U.S. economy coming out of this recession," Mr. McLaughlin said.


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