Economic research

Mortgage rates drop to 3.89% amid geopolitical uncertainty

Freddie Mac Mortgage Rates – February 24, 2022

What happened to mortgage rates this week:

Freddie Mac’s fixed rate for a 30-year loan fell this week as geopolitical uncertainty weakened 10-year Treasury yields. The rate on a 30-year loan registered 3.89%, down 3 basis points from last week’s peak. As the world reacts to developments in Ukraine, the uncertainty will likely mean a pause in the recent pace of increases.

Yet mortgage rates remain 84 basis points above their level of just 9 weeks ago as expectations for economic growth, inflation and monetary policy have undergone a major revision. There have only been 2 similar moves in recent history – immediately after the 2016 election, when rates jumped 85 basis points in 10 weeks, and during the 2013 “tantrum” when rates jumped 116 basis points in 11 weeks. Either way, home sales momentum slowed the following year due to the impact on affordability, as rising rates mean higher property costs even if home prices are unchanged. As illustrated in our recent analysis of housing costs at various ratesthis is especially true for those depositing a small amount.

What does that mean:

Rising costs are forcing households to move in 2022 stuck between a proverbial rock and a hard place, as both rent and SEO prices continue to rise. For those planning a short-term stay, renting may be the best choice although, as our data shows this is the case in 26 of the top 50 markets, the monthly cost of owning a first home is lower than renting. Meanwhile, recent buyers who aren’t planning on moving anytime soon are probably breathing a collective sigh of relief, since the lion’s share of their monthly payments are fixed. This is something to consider for renters whose rental and buying costs are close to balance, especially if they hope to live in their next home for several years. In order to navigate this year’s housing market – whether renting or buying – making a list of must-haves versus good-to-haves can help focus research on priority features and enable decisions fast and safe.

Danielle HaleDanielle Hale

Danielle Hale