• Coronavirus fears have roiled markets and lowered interest rates, pushing the rate on the 30-year fixed-rate mortgage to the lowest in more than seven years.
  • "Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize," Mike Fratantoni, senior vice president and chief economist at MBA, said in a statement .
  • Read more on Business Insider .

Borrowers rushed to refinance their mortgages this week as coronavirus fears dragged interest rates down.

Weekly mortgage refinance applications surged 26% in the last week, and were 224% higher than a year ago, according to Mortgage Bankers Association data released Wednesday. Mortgage applications also increased 15.1% from a week earlier, the data showed.

The uptick in applications for borrowing and refinancing come as the average rate on the popular 30-year fixed-rate mortgage dropped below 3.23%, the lowest level in eight years , last week. The drop was sparked by market panic due to coronavirus that sent investors piling into safe-haven assets, pushing Treasury yields to historic lows. Mortgage rates loosely follow US Treasury yields.

It's possible that the trend will continue. On Tuesday, the yield on the benchmark 10-year US Treasury bond fell below 1% for the first time ever .

"Given the further drop in Treasury rates this week, we expect refinance activity will increase even more until fears subside and rates stabilize," Mike Fratantoni, senior vice president and chief economist at MBA, said in a statement .

While the market volatility caused by coronavirus has created a sweet spot for purchasing a home or refinancing a mortgage, the next few weeks will show if the momentum continues into spring homebuying season. Purchase applications dipped slightly for the week, but are up 10% from a year ago, according to MBA.

It remains to be seen what impact the coronavirus outbreak will have on the US economy. On Tuesday, the Federal Reserve announced an emergency interest rate cut of 50 basis points , the first and largest since the financial crisis, in an effort to protect the economy from a virus-related slowdown. Still, as the death toll rises and COVID-19, the illness caused by the virus, continues to spread, it's unclear how the US economy will react.

"The next few weeks are key in whether these low mortgage rates bring in more buyers, or if economic uncertainty causes some home shoppers to temporarily delay their search," Fratantoni said.

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