Mortgage rates have plummeted since the beginning of the year to the lowest average since 2016 as a result of market movements in response to the coronavirus.
Yesterday, the Federal Reserve followed suit and slashed interest rates in an emergency move to cushion the U.S. economy from the coronavirus outbreak, and Wall Street is already betting it will lower them even further.
While the Federal Reserve adjusts short-term interest rates, mortgage rates fluctuate based on long-term bond rates.
Here’s what the Fed’s surprise interest rate cut means for mortgage rates:
Borrowers are the direct beneficiaries. When the Fed cuts rates, it makes loans for autos and credit cards cheaper.
At the same time, the 10-year Treasury yield has been trading at its lowest ever, pushing down mortgage rates to near record lows, even though they’re not typically linked to Fed moves.
Current low rates have already caused a boom in refinancing activity. And demand among home-buyers remains elevated, in spite of the short supply of homes for sale.