U.S Mortgage Rates Slide in Response to Russia’s Invasion of Ukraine

Mortgage rates hit reverse going into March, ending a string of weekly increases through mid-February.

In the week ending 24^th February, 30-year fixed rates slid by 13 basis points to 3.76%. 30-year fixed rates had slipped by 3 basis points in the week prior.

Year-on-year, 30-year fixed rates were up by 74 basis points.

30-year fixed rates were still down by 118 basis points since November 2018’s last peak of 4.94%.

Economic Data from the Week

Economic data from the U.S took a back seat as demand for the safe havens saw a slide in U.S Treasury yields, which weighed on mortgage rates. Russia’s invasion of Ukraine weighed heavily on riskier assets in the week.

Freddie Mac Rates

The weekly average rates for new mortgages, as of 3^rd March, were quoted by Freddie Mac to be:

According to Freddie Mac,

Geopolitical tensions led to a fall in U.S Treasury yields as investors moved to the safety of bonds.
Falling yields led to a decline in mortgage rates.
While inflationary pressures remain, the impact of the war in Ukraine has caused market uncertainty.
Rates are expected to stay low in the short term but will likely resume the upward trend in the coming months.

Mortgage Bankers’ Association Rates

For the week ending 25^th February, the rates were:

Average interest rates for 30-year fixed with conforming loan balances rose from 4.05% to 4.15%. Points decreased from 0.48 to 0.44 (incl. origination fee) for 80% LTV loans.
Average 30-year fixed mortgage rates backed by FHA increased from 4.09% to 4.15%. Points rose from 0.56 to 0.74 (incl. origination fee) for 80% LTV loans.
Average 30-year rates for jumbo loan balances increased from 3.84% to 3.88%. Points fell from 0.45 to 0.40 (incl. origination fee) for 80% LTV loans.

Weekly figures released by the Mortgage Bankers Association showed that the Market Composite Index, a measure of mortgage loan application volume, slipped by 0.7% in the week ending 25^th February. The Index tumbled by 13.1% in the previous week.

The Refinance Index increased by 1% and was 56% lower than the same week a year ago. In the week prior, the Index had fallen 16%.

The refinance share of mortgage activity fell from 50.1% to 49.9%. In the previous week, the share decreased from 52.8 to 50.1%.

According to the MBA,

Mortgage rates reached multi-year highs, weighing on application activity.
As a result of rising rates, the refinance share of applications fell below 50%.
Purchase activity remained weak, but the average loan size increased again.
The MBA 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.

For the week ahead

It’s a quiet first half of the week, with stats limited to U.S JOLT’s job openings. Market sentiment towards Russia’s invasion of Ukraine and news updates will remain the key driver. A further escalation of military strikes on Ukraine and responses by NATO, the United Nations, and Western governments would drive demand for bonds and weigh on mortgage rates.

This article was originally posted on FX Empire