Mortgage interest rates dropped over the past week, pushed lower by the economic reaction to the Russian invasion of Ukraine, according to the latest data from Freddie Mac.
The average 30-year fixed-rate mortgage decreased to a 3.76% annual percentage rate (APR) for the week ending March 3, according to Freddie Mac’s Primary Mortgage Market Survey. This is down from 3.89% last week – a drop of 13 basis points – but up from 3.02% last year.
“Geopolitical tensions caused U.S. Treasury yields to recede this week as investors moved to bond security, leading to a drop in mortgage rates,” Freddie Mac Chief Economist Sam Khater said. “While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months.”
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Mortgage rates for other loan types also dropped this week as investors weigh the Russia-Ukraine conflict and rising oil prices. The 15-year mortgage rate dropped to 3.01%, down from 3.14% last week but up from 2.34% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) decreased to 2.91%, down from 2.98% last week but up from 2.73% last year.
“The Freddie Mac fixed rate for a 30-year loan continued its retreat, with a 13 basis point slide to 3.76% this week, following the sharp drop in the 10-year Treasury earlier in the week,” George Ratiu, Realtor.com’s manager of economic research, said. “Investors are concerned about the deepening Russia-Ukraine conflict and rising oil prices, and are wary of spillover effects from rising economic sanctions.”
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Fed on track to raise rates in March
Despite these lower interest rates, the Federal Reserve is still expected to raise the federal funds rate in March in order to control rising inflation.
“Markets have their eyes on mounting inflation and expect the Federal Reserve to proceed with a 25 basis point hike at its upcoming mid-March meeting,” Ratiu said. “Market volatility and rising oil prices are likely to push bond yields into larger swings, while inflation will keep upward pressure on mortgage rates.”
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