Mortgage rates fluctuate as economic volatility continues - Movement Mortgage Blog

An already volatile American economy will be further impacted in the coming weeks as Russia officially attacked Ukraine at the end of February. Dow futures plummeted by more than 800 points on the news with oil prices shooting up. A global benchmark for oil, Brent Crude, went over $100 per barrel for the first time since 2014. 

This only contributes to the intense inflationary pressures already being felt by the United States as the country works its way out of the COVID-19 pandemic and the Federal Reserve tries to balance out its support. The Fed’s bond purchase tapering is expected to come to a close in March with benchmark overnight lending rate increases following soon after. 

While the economy as a whole struggles to find its footing, the housing industry is also in flux as mortgage interest rates climb rapidly. The 10-year Treasury note yield is also regularly running near or above 2.00% after starting the month below 1.8%. The 10-year note typically runs 1-2 percentage points below mortgage interest rates and is a good indicator to watch to figure out where rates are moving. 

The latest Freddie Mac 30-year fixed-rate mortgage average came in at 3.89% with most other media outlets having reported rates north of 4% for the last few weeks. The Freddie Mac average is a decline from the previous week, however as Freddie Mac’s economists note, “Even with this week’s decline, mortgage rates have increased more than a full percent over the last six months. Overall economic growth remains strong, but rising inflation is already impacting consumer sentiment, which has markedly declined in recent months. As we enter the spring homebuying season with higher mortgage rates and continued low inventory, we expect home price growth to remain firm before cooling off later this year.”

Rising rates have caused refinance volume to drop off quickly. The Mortgage Bankers Association’s data shows that the number of refinance applications for this past week was 56% lower than one year ago. Keep in mind that the last two years have given us historically high volume that may not ever be reached again. So talking about 56% below the highest level ever for refinances essentially means we’re normalizing again in the housing industry. 

As we’ve mentioned before, a 4% mortgage interest rate is still extremely low when you look back at how high rates have been historically. You have to go back more than a decade to find the last time we hit 5% on average. Furthermore, the average we talk about doesn’t necessarily mean that is the interest rate a borrower will receive. Borrowers with very strong credit, a higher down payment and lower debt-to-income ratio may qualify for a rate below 4%. That’s why it’s always best to talk to your Movement Mortgage loan officer to understand all your options before going house hunting. 

OF NOTE:

Freddie Mac is now allowing originators to verify income without forcing borrowers to show paper statements. The agency’s asset and income modeler (AIM) now allows for mortgage lenders to verify income and assets using one report, meaning folks who use direct deposit for their paychecks should no longer have to print out paper income statements to get their loans approved!

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Movement Staff

The Market Update is a weekly commentary compiled by a group of Movement Mortgage capital markets analysts with decades of combined expertise in the financial field. Movement's staff helps take complicated economic topics and turn them into a useful, easy to understand analysis to help you make the best decisions for your financial future.