As National Bond Yields Fall... US Mortgage Rates Drop Below 3% for the First Time Ever

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] The average 30-year fixed mortgage rate in the United States has fallen below 3% for the first time ever. Due to prolonged low interest rates and the impact of the novel coronavirus disease (COVID-19), Treasury yields have sharply declined, causing mortgage rates to continue their downward trend for several weeks.

On the 16th (local time), the Wall Street Journal (WSJ) reported, citing data from the U.S. federal financial institution Freddie Mac, that the average 30-year fixed mortgage rate in the U.S. was recorded at 2.98%. This is the first time the rate has broken below 3% since records began in 1971, marking a 50-year milestone. The 30-year fixed mortgage rate was 3.81% during the same period last year and was still in the high 3% range at 3.72% earlier this year.

The 30-year fixed mortgage rate has set a record low seven times over three consecutive weeks this year. WSJ explained that the impact on the 30-year rate has been significant as U.S. Treasury yields have fallen to their lowest levels due to the effects of COVID-19. Jeff Tucker, an economist at Zillow Group, described the sub-3% rate as "an incredible level" and said it is "a sign that we are still in a crisis situation."

Generally, mortgage rates tend to move similarly to the 10-year Treasury yield. The U.S. 10-year Treasury yield closed at 0.618% on the day, with little change from the previous day. It has dropped to about one-third of the 1.882% yield recorded on January 2. As market uncertainty grows and recession concerns increase, demand for safe assets like U.S. Treasuries rises, causing prices to increase and yields to fall.

Typically, when mortgage rates fall, home sales increase. However, WSJ assessed that this time, the real estate market has barely alleviated the damage caused by COVID-19. Existing home sales decreased by 17.8% in April and 9.7% in May compared to the previous months. WSJ noted that the number of Americans who have lost jobs in recent months due to COVID-19 has increased, making them reluctant to buy homes, and fears of a resurgence of COVID-19 could prolong the current situation.

This content was produced with the assistance of AI translation services.