There they go again. A survey says mortgage rates have fallen to another new all-time low and have put homebuyers "in the buying mood" while giving homeowners more reason to refinance and save.
Low lending costs and beefed-up borrowing are exactly what Chairman Jerome Powell and the Federal Reserve want to see as they try to heave the U.S. economy out of its COVID-19 recession.
Powell last week issued a fresh warning about the risk of "longer-term damage" to the economy, and he pledged to members of Congress that the Fed would keep interest rates extremely low.
Mortgage rates plunge to new low in 50-year-old survey
Mortgage rates plummeted last week to an average 3.13% for a 30-year fixed-rate home loan, from 3.21% a week earlier, mortgage company Freddie Mac reported on Thursday.
The new rate is the lowest ever recorded in Freddie Mac's weekly survey, which started in 1971, and it was fourth time since early March that the company announced a new all-time low.
The survey rates come with an average 0.8 point. One year ago, borrowers were landing 30-year fixed mortgages with typical rates of 3.84%.
Another, more frequent survey of lenders has been finding even lower average mortgage rates this month. Mortgage News Daily reported that 30-year rates sank to an unprecedented 2.94% on Thursday June 11.
And you think that's good? Smart mortgage comparison shoppers have been turning up rates as incredibly low as 2.5%.
How the Fed is helping push down rates
The financial markets have been on a kind of scary thrill ride: diving one day, then rising for a couple of days before stumbling again. But mortgage rates have been more stable thanks to the Federal Reserve, says Danielle Hale, chief economist at Realtor.com.
"The Fed has adopted a cautious, supportive posture about how the economic recovery will progress. This Fed support is helping to prevent rates from rising too quickly," Hale says.
In back-to-back appearances before congressional committees last week, Fed Chairman Powell warned that there's "significant uncertainty" about how long it will take for the economy to rebound, and he indicated that the central bank will keep holding a key interest rate close to zero.
The Fed's policies are making the housing market one of the bright spots as the economy struggles to come back amid the coronavirus pandemic. Demand for mortgages to buy homes is the highest since January 2009, notes Sam Khater, Freddie Mac’s chief economist.
"Mortgage rates have hit another record low due to declining inflationary pressures, putting many homebuyers in the buying mood," Khater says.