Coronavirus Outbreak Causes Further Decline In US Mortgage Rates
03 Feb 2020
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- Both the 30-year and 15-year fixed-rate mortgage have declined in the past week, standing at 3.51% and 3%, respectively.
- The decline has come due to a slowdown in global markets, which has prompted a reduction in the benchmark interest rate in the US.
- A cure for coronavirus, once discovered, could cause mortgage rates to increase.
Mortgage rates in the US are at their lowest point in a year, partially as a consequence of the coronavirus outbreak in China. The current rate is lower than last year’s rate by almost a whole percentage point. According to reported figures, the average fixed-rate mortgage rate for a 30-year mortgage stood at 3.51% for the week ended 30th January, after declining by 9 basis points compared to the rate reported in the week prior. Freddie Mac has reported that the 15-year mortgage fixed-rate is also down to 3%, after falling four basis points. Experts have opined that this recent decline has partially come from the impact of the coronavirus in China, which has spread across the world at an alarming rate. The World Health Organization has declared a global health emergency
to contain the virus, as the disease has already infected more than 7,500 reported cases while around 170 people have succumbed to the virus. As a precaution to protect their citizens, many countries around the world have evacuated their citizens from China and brought them back home, where they are being kept in quarantine to ensure they are not infected by the virus. The impact of the coronavirus has been felt in the bond and equity markets as well, as both markets have become increasingly volatile. Although stocks fell in the past week, corporate profitability drove them back up again. It is important to note that the 10-year Treasury note yield has also declined over the past week, and mortgage rates have followed that decline. Experts believe an increased impact of the coronavirus on global markets could cause a further decline in mortgage rates moving forward. It is still unclear exactly how destructive the coronavirus will be to businesses around the world, as the virus may be contained sooner than expected. In fact, experts believe that mortgage rates could shoot up as soon as a cure for coronavirus becomes available. However, markets have already responded
by having slowed down in preparation for the worst. If this slowdown persists, the benchmark interest rate quoted by the Federal Reserve might decline, prompting a further decline in mortgage rates.