Mortgage rates in the United States plunged to an all-time low in the last few days, and banks across the country are now faced with a flood of mortgage applications as loan borrowers turn to refinancing.
Market risk distaste as a result of the escalating spread of the coronavirus did most of the damage last week, as the central bank issued an emergency interest rate reduction late Tuesday. The decline saw mortgage rates decline to its lowest in its nearly 50-year history.
Compared to this time in the last quarter of 2019, 30-year fixed rates fell around 111 basis points; 30-year fixed rates also retreated by around 164 basis points since November 2018's most recent high of 4.95 percent.
The plunge in US mortgage rates as well as prices of oil could lift consumer appetite, which was up less than estimated in February, just a day after the global stocks experienced one of its darkest days in the midst of the virus scare. A rally in consumer confidence, as a result, could alleviate those financial fears.
The mortgage business is apparently in uncharted territory these days, with interest rates crashing under 3.5 percent for the first time ever. The output on the benchmark 10-year US Treasury bonds continues to drop every day to record lows.
After some dismal Markit survey-based data from the previous week, the non-factory purchasing managers' index delivered positive results, but not enough to avert a US currency rout.
The Federal Reserve's 50-bps rate cut, with the spread of the virus in the US, paints a gloomy forecast. The markets are predicting a second rate cut later this month, all because one rate cut could have waited until the FOMC meeting.
Weekly data provided by the US Mortgage Bankers Association indicated that the Market Composite Index, which is a gauge of mortgage loan volume application, advanced 15 percent in the week ending February 28.
The Refinance Index climbed 25 percent from the previous week and was 226 percent higher compared to the same week last year. In the previous week, the Index had dropped 1 percent.
The refinance share of mortgage movement surged from 61 percent to 66 percent in the week ending February 28. In the week before that, the refinance share had fallen from 63 percent to 61 percent.
Based on MBA figures, fixed mortgage rates were down to their lowest mark in over seven years. Negative sentiment towards the economic effects from the spread of the coronavirus was seen as the main culprit.