The rate on a 30-year fixed-rate mortgage has fallen to 3.29%, the lowest rate ever recorded in mortgage giant's Freddie Mac's (FMCC -2.26%) 50-year history of monitoring the market.

Rates are falling as the COVID-19 coronavirus continues to weigh on markets and push stocks down. The Federal Reserve on Tuesday lowered the federal funds rate by 0.50% to a range of 1% to 1.25%, causing the yield on a 10-year Treasury note to fall below 1% for the first time in history.

Two people shake hands over a model house.

Image source: Getty Images.

The falling 30-year rate, down 16 basis points from a week prior and down 112 basis points from the same week in 2019, theoretically should lead to an increase in home sales. Indeed, Freddie Mac said mortgage applications were up 10% last week compared to a year prior.

The question for home builders and sellers is whether the momentum is sustainable or whether the growing outbreak slows economic activity and keeps shoppers from visiting homes. The low rates will also make life difficult for banks, which make their money based on the spread between the rates charged on loans and the rates paid in interest.

For those interested in buying a house, the timing couldn't be better. The rate on a 15-year loan fell 16 basis points from last week to 2.79%. At that price an increasing number of buyers can take advantage of the shorter-term loan and pay significantly less interest over the life of the loan.