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Home loan rates fell this week as Russia’s invasion of Ukraine added pressure to US financial markets, providing a brief window for mortgage seekers to secure a lower interest rate. However, the rate cut — which many experts predict will be short-lived — offers minimal savings to homebuyers who faced another record high in February home prices.
The average 30-year fixed-rate mortgage fell 13 basis points to 3.76% for the week ending March 3 from the previous week, according to Freddie Mac. The average 15-year fixed-rate mortgage also fell 13 basis points in the same week, to an average of 3.01%. (A basis point is one hundredth of a percent.)
Mortgage rates have fallen over the past two weeks, in part due to the Russian invasion of Ukraine from February 24. Yet mortgage rates remain much higher than at the start of the year, when the 30-year fixed rate hovered at 3.22. %.
Where Mortgage Rates Are Heading Amid Global Uncertainty
Federal Reserve Chairman Jerome Powell said in Congressional testimony on Wednesday that they still intend to raise rates at the next Fed meeting and gradually reduce buying. bonds – steps the Fed planned to accelerate before the invasion of Ukraine. But investors believe the Fed may be moving a little slower in light of Russia’s advance, which could mean rates won’t rise as quickly as some had expected earlier this year.
“There’s so much unpacking in the market right now, including how the Ukraine crisis is unfolding,” says Matt Quinn, vice president of guaranteed rate mortgages in St. Louis. “Even if the Fed raises rates, we could still see some relief for borrowers.”
Mortgage rates follow the path of the benchmark 10-year US Treasury note. Investors tend to buy treasury bonds, which are considered an ultra-safe place to put money when financial markets are disrupted, such as with the invasion of Ukraine. When bond prices rise, yields fall. Mortgage rates tend to follow these fluctuations, but more slowly and on a smaller scale.
The flow of money to bonds began last week, when Russia first advanced on Ukraine, and continued in earnest for several days, sending the 10-year yield down nearly 30 points. at its lowest.
How Mortgage Applicants Can Handle Unpredictable Rates
As rates continue to rebound, it is important that borrowers stay in close contact with their lenders, who can confirm whether or not buyers can still afford the upper end of their price range. This is also a good time to investigate locking in your rate for buying a home or lowering your mortgage rate through a refinance if you currently have a home loan.
“Staying in communication is key,” Quinn says. “As rates go up, it drives down what people can afford, especially if they were pre-approved a few months ago.”
Related: Compare current mortgage rates
But fluctuating interest rates aren’t the only concerns for homebuyers: home prices continue to rise rapidly. The median home price in February was $392,000, the highest on record and up nearly 13% from a year ago, according to Realtor.com.
“Spiking prices and higher rates are creating challenges for first-time homebuyers, forcing them to make tough choices in light of higher monthly costs for food, gas, clothing , cars and healthcare,” Realtor.com director of economic research George Ratiu said in a general statement.
In February, homes sold in just 47 days on average as demand pushed listing prices higher. As rates also rise, the mortgage payment on a median-priced home is now more than $300 a month higher than a year ago.