US mortgage rates drop to record low amid pandemic-driven slowdown

Lower rate can potentially boost the housing market in the country

The US mortgage rates have hit a new record low amid the economic slowdown. Getty Images

Mortgages rates have found another record low, potentially boosting a housing market that has been a bright spot for a shaky US economy.

The average for a 30-year fixed loan fell to 2.88 per cent, the lowest in nearly 50 years of record keeping by Freddie Mac. It was the eighth time since the coronavirus started roiling financial markets that rates have dropped to a new low.

The previous record was 2.98 per cent last month, when borrowing costs fell below 3 per cent for the first time. The lower rates are “giving potential buyers more purchasing power and strengthening demand,” Sam Khater, chief economist at Freddie Mac, said in a statement on Thursday.

The record-low rates have propped up home prices and fueled a housing recovery in an economy battered by the pandemic.

“This is definitely helping affordability,” said Tendayi Kapfidze, chief economist at LendingTree. “It’s also attracting a lot of people into the market who otherwise might not have been so quick to act.”

The slide in borrowing costs comes as the Federal Reserve holds its benchmark rate near zero and buys mortgage bonds as part of its plan to stimulate the economy.

The low rates driven a surge in applications for mortgages that has inundated lenders. Credit standards have tightened as they work through the flood of business, but borrowing could drop even more, according to Greg McBride, chief financial analyst at Bankrate.com.

“As they have more capacity available, their quotes will become more competitive,” he said. “You could see still lower rates on average as well as lower rates offers in the market place.”