Mortgage rates hitting record lows is more about coronavirus uncertainty than a good sign for the housing market

Associated Press

Pike St. in downtown Seattle.

• Mortgage rates continue to fall as the coronavirus spreads across the US.
• The average 30-year fixed-rate mortgage fell to 3.29%, a record low, while the average 15-year mortgage rate approached its lowest ever, at 2.79%.
• While it is unclear how the low rates will impact housing markets, they may not be a boost to first-time homebuyers. So far, they appear to have mainly led to a surge in refinancing, as people who already have mortgages rushed to take advantage.
• Visit Business Insider's homepage for more stories.

The first week of March, as new cases of the novel coronavirus appeared in more US states and cities, the Federal Reserve cut interest rates by 0.50% to try to protect the economy from the disruption brought on by the outbreak. Mortgage rates are closely linked to the yield on the 10-year Treasury, and as that dropped on the rate cut, mortgage rates fell to their lowest level ever in a history of nearly 50 years.

As reported by Freddie Mac, the average 30-year fixed-rate mortgage fell to 3.29%, the lowest ever, and the average 15-year mortgage rate fell to 2.79%, approaching the record low of 2.56% in 2013.

The same week in early March, mortgage applications shot up by 10% when compared to the previous year, with homebuyers taking advantage of the low rates. But previous weaknesses in the US housing market, along with the massive uncertainty and anxiety brought on by the outbreak, likely won't lead to many first-time homebuyers getting ultra-cheap new mortgages.

Instead, what we are seeing so far is people who already have mortgages using this opportunity to refinance. Bankrate reported that refinance applications shot up 26% at the end of February, and that mortgage lenders were having trouble keeping up. In fact, some raised their advertised rates in an attempt to weed out what Bankrate described as "rate watchers." And increased application numbers caused JPMorgan Chase to pause email marketing campaigns on refinancing, The Wall Street Journal reported.

With the coronavirus outbreak showing few signs of slowing in the US, it's not clear what the impact on housing markets will be. For instance, while New York declared a state of emergency last weekend, major brokerages in Manhattan have yet to see a significant impact on business.

"I haven't experienced a drop on the seller or the buyer side," broker Gill Chowdhury from Warburg Realty told Business Insider. Chowdhury said he has deals across the city that are transacting smoothly despite the spread of the coronavirus.

However, market activity is at risk of decreasing as the number of coronavirus cases increases.

As The Wall Street Journal reported, if the US economy is impacted like China's economy has been, people will start to lose paychecks and they won't prioritize major purchases like houses.

And even before the coronavirus began to chill economic activity, many potential first-time buyers were already having a hard time breaking into the housing market. As Business Insider's Hillary Hoffower reported, the US has a shortage of starter homes overall, despite many favorable conditions besides record-low mortgage rates, such as increasing affordability in some markets.

But if you aren't put off by the coronavirus-related uncertainty, and know where to put your money, it's rarely been cheaper to get a good deal on a mortgage. Unfortunately, those are two big ifs.

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