Why Did Mortgage Rates Fall Again? How Ukraine and Russia Affect Housing.

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Mortgage rates fell for a second consecutive week after Russia’s invasions of Ukraine triggered a flight to safer assets that sent Treasury yields lower.

The average rate on a 30-year fixed mortgage was 3.76% for the week ending Thursday, Freddie Mac said. Last week, the rate fell 0.3 percentage point to 3.89%, down from its 2022 peak of 3.92%.

This week’s drop came as investors turned to bonds and other less risky assets amid Russia’s war with Ukraine. After breaching 2% last month, the 10-year Treasury yield fell as low as 1.68% in intraday trading this week, according to Tradeweb. The yield was trading around 1.87% on Thursday. Mortgage rates typically move alongside the 10-year Treasury yield.

“Geopolitical tensions caused U.S. Treasury yields to recede this week as investors moved to the safety of bonds, leading to a drop in mortgage rates,” Freddie Mac chief economist Sam Khater said.

While rates have dropped from recent multiyear highs, the average 30-year fixed mortgage is still about 0.65 percentage point higher than the last reading of 2021. Inflation has in part driven mortgage rates higher so far this year, with the average 30-year fixed rate rising as high as 3.92% in February.

“While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty,” Khater said, adding that rates are expected to remain low initially, but will likely rise in the span of months.

Rising rates in recent weeks have highlighted concerns about home affordability. The volume of applications for both refinance and purchase loans was lower on a year-over-year basis for the week ending Feb. 25 as rates rose, according to Mortgage Banker Association data.

Freddie Mac’s most recent quarterly forecast projects the 30-year fixed rate to average 3.6% this year. As of this week, the average rate in 2022 was 3.62%.

Write to Shaina Mishkin at [email protected]