9-Mar-20 – Chicago home buyers and families seeking to refinance now have an opportunity to lock in the lowest mortgage interest in nearly five decades.

Fueled by worldwide investor panic sparked by the spread of the coronavirus, average 30-year fixed-rate mortgages plummeted from 3.45 percent to 3.29 percent – the lowest rate ever reported in Freddie Mac’s Primary Mortgage Market Survey (above), which dates to 1971. A year ago at this time, the 30-year fixed loans averaged 4.41 percent.

“The average 30-year fixed-rate mortgage hit a record 3.29 percent on March 5, the lowest level in its nearly 50-year history,” said Sam Khater (left), Freddie Mac’s Chief Economist. Fifteen-year fixed loans averaged 2.79 percent, down from 2.95 percent a week earlier. A year ago, 15-year fixed loans averaged 3.83 percent.

Previously, mortgage rates reached a historical rock bottom on November 21, 2012, when the 30-year fixed mortgage average hit 3.31 percent, according to Freddie Mac’s archives.

On March 6, Chicago lenders were quoting an attractive range of rates from 3.125 to 3.337 percent, reported RateSeeker. Under an aggressive loan program involving pledged money market funds, Huntington Bank was quoting 2.45 percent on a seven-year balloon loan.

Meanwhile, mortgage applications increased ten percent in the past week from one year ago and show no signs of slowing down.

“Given these strong indicators in rates and sales, as well as recent increases in new construction, it’s clear the housing market continues to be a positive force for the broader economy,” said Khater.

In a surprise move on March 3, the Federal Reserve cut its benchmark interest rate by a sizable 0.5 percent to support the economy in the face of the spreading coronavirus. The move, which the Fed’s policy committee backed unanimously, lowered its benchmark rate to the 1-1.25 percent range.

COVID-19 will impact economy, says Fed chairman

Over the past week, the Dow Jones Industrial Average went on a roller coaster ride because of virus fears. The yield on the 10-year Treasury note fell below one percent for the first time ever. Investors around the world bid up bond prices – which move in the opposite direction of yields – as they sought safety from the stock market’s turmoil.

It was the Fed’s first move since last year, when it reduced its key short-term rate three times. It is also the first time the central bank has cut its key rate between policy meetings since the 2008 financial crisis and the largest rate cut since then.

Fed Chairman Jerome Powell said the virus “will surely weigh on economic activity both here and abroad for some time.”

At the same time, Powell sought to balance those concerns by noting that the United States economy remained in good shape, with unemployment low and consumer spending solid. “The economy continues to perform well,” said Powell (left). “We will get to the other side of this.”

Economists said lower rates can lead home buyers and businesses to borrow and spend, which can boost economic activity. But they can’t directly address the problems that the virus has caused – such as closed factories, canceled business travel, and disrupted company supply chains.