Continued Low Mortgage Rates Will Stress Spring Selling Season

New York, NY, February 25, 2022-Mortgage rates hovered just below 4% for a second week, maintaining stress on potential buyers facing high prices and low inventory, according to the Wall Street Journal.

“The average rate for a 30-year fixed-rate loan was 3.89%, mortgage-finance giant Freddie Mac said Thursday, down slightly from 3.92% last week. At the beginning of the year, the average rate on America’s most popular home loan was 3.22%.

“The Russian invasion of Ukraine stands to push down mortgage rates as investors flock to U.S. Treasurys, widely seen as safe investments during times of political instability, economists said. Mortgage rates are closely tied to yields on the 10-year U.S. Treasury, which fell near their lowest levels this month on Thursday.

“The retreat in Treasury yields reverses a 2022 increase driven in part by expectations that the Federal Reserve will begin raising interest rates next month for the first time since 2018, reflecting high inflation and efforts to normalize the economy following earlier waves of pandemic-related stimulus.

“‘On the one hand, you have the Fed putting upward pressure on mortgage rates, and then on the other hand, these global tensions are anchoring rates a little bit,’ said Taylor Marr, deputy chief economist at Redfin.

“Expectations that the Fed will raise rates and reduce its purchases of mortgage-backed securities have driven up the average mortgage rate in recent weeks. At their January meeting, officials at the central bank discussed accelerating the pace of planned rate increases if inflation doesn’t subside.

“Bigger borrowing costs are another obstacle for would-be home buyers already facing home prices that rose at a record pace in 2021. Economists expect price increases to moderate this year, but rising interest rates threaten to make mortgage payments more expensive.

“The monthly payment on a $375,000 home with an interest rate of 4% is $220 higher than the payment on a similarly priced home in December 2020, when the average mortgage rate was below 3%, according to data.”