Mortgage rates climb even amid concerns of ongoing war

After falling for two consecutive weeks, mortgage rates headed back upward, according to Freddie Mac, with markets still showing volatility from the impact of the Russia-Ukraine conflict.

The 30-year fixed-rate mortgage averaged 3.85% for the weekly period ending March 10, according to Freddie Mac’s Primary Mortgage Market Survey, up nine basis points from 3.76% seven days earlier. One year ago, the 30-year rate average stood at 3.05%.

Following the onset of hostilities in Ukraine, investors moved their capital out of riskier assets to Treasuries — a “flight to quality” — initially driving mortgage rates down, according to several economists. Meanwhile, inflationary factors remained, with data over the past week pointing to continued supply-chain issues and strong job growth. Federal Reserve Chair Jerome Powell also gave the strongest signal yet that an increase in the federal funds rate would likely come over the next week, while also hinting that fewer hikes might occur this year than originally planned.

“All of these factors and the overall environment of uncertainty have contributed to significant mortgage rate swings over the past few days,” said Robert Heck, vice president of mortgage at online marketplace Morty, in a recent statement to National Mortgage News. Movements over the last month “represent some of the most volatile weeks in recent history,” he added.

Although current rates are lower from their heights of early February, they have climbed back up from some of its downward slide, much of it due to the anticipated increase of the funds rate, which is expected to be announced at the Federal Open Market Committee meeting taking place March 15 to 16.

The recent mortgage-rate movements taking place currently are largely in response to what is about to occur, Heck said.

“While the market might be volatile, it's forward-looking, which means it often has a better pulse on where things are headed than any single perspective. The results of Fed meetings are usually priced into rates weeks before a meeting,” he said.

But ongoing tensions in Eastern Europe have the potential to quickly change the outlook, according to Sam Khater, chief economist at Freddie Mac, who said in a press release that “uncertainty about the war in Ukraine is driving rate volatility that likely will continue in the short-term.”

Khater, however, did not stray from the 2022 outlook that many economists expressed earlier this year. “Over the long-term, we expect rates to continue to rise as inflation broadens and shortages increasingly impact many segments of the economy,” Khater said.

As it did for the 30-year rate, averages for 15-year and adjustable-rate mortgages similarly climbed over the past week. The 15-year fixed rate increased to 3.09%, an eight basis point rise from 3.01%. In the same week a year ago, the 15-year rate averaged 2.38%.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage saw an uptick of six basis points increasing to 2.97% from 2.91% the previous week, while in the same period last year, the 5-year ARM came in at 2.77%.