The 30-year fixed-rate mortgage averaged 3.76% in the week ending March 3, up from 3.89% the previous week, according to Freddie Mac.
Interest rates fell as a result of declining yields on US government bonds this week as investors switched to bond security amid growing tensions between Russia and Ukraine, said Sam Hatter, Freddie Mac’s chief economist.
“As long as inflationary pressures remain, the cascading effects of the war in Ukraine have created market uncertainty,” Hatter said. “Interest rates are therefore expected to remain low in the short term, but are likely to increase in the coming months.”
Experts and analysts have predicted a fairly steady rise in mortgage rates this year, but Russia’s invasion of Ukraine, followed by severe economic sanctions, has created uncertainty.
“Investors are concerned about the deepening conflict between Russia and Ukraine and rising oil prices and are wary of the side effects of growing economic sanctions,” said George Ratiu, economic research manager at Realtor.com.
He said markets are focused on rising inflation and expect the Federal Reserve to continue with a 25 basis point increase in its upcoming meeting later this month.
“Market volatility and rising oil prices are likely to lead to greater fluctuations in bond yields, while inflation will continue to push upward interest rates on mortgages,” Ratiu said.
Mortgage applications are declining
Mortgage applications fell in the last full week of February, according to the Mortgage Bankers Association, in part in response to rising interest rates.
Applications for home loans remain weak, said Joel Kahn, associate vice president of economic and industrial forecasting at the MBA. Meanwhile, the average loan size has risen again – to a new record of $ 454,400 – an indication that house prices are still rising and a larger share of mortgage activity is seen at the higher end of the market, he said.
“We will continue to assess the potential impact on mortgage demand from the sharp drop in interest rates this week due to the invasion of Ukraine,” he said.
Meanwhile, Ratiu said, real estate markets are seeing an early start to the spring shopping season, with unusually high demand and record low inventories continuing to boost house prices.
“At today’s rate, the average home buyer will pay more than $ 278 a month more than a year ago to pay off his mortgage,” Ratiu said. “Rising prices and higher prices are creating challenges for first-time home buyers, making them difficult to make in light of higher monthly spending on food, petrol, clothing, cars and healthcare.