Ukraine Crisis Could Boost Mortgage Demand as Interest Rates Drop Sharply
Mortgage applications to purchase a home dropped 2% last week and were 9% lower year-over-year, but stagnant demand could soon inch higher as interest rates continue to fall after the Russian invasion of Ukraine. According to CNBC, the war in Ukraine has caused investors to rush into the bond market, resulting in lower yields on the U.S. 10-year Treasury, and, in turn, lower mortgage rates.
The average rate on the 30-year fixed-rate mortgage fell 28 basis points in just the past two days, but the subsequent market shift has yet to take hold. The refinance share of mortgage activity over the past week decreased from 50.1% of total applications to 49.9% and mortgage applications also dropped slightly.
The expectation going into this year was that rates would move higher steadily, as the Federal Reserve eases its purchases and holdings of mortgage-backed bonds. The Fed has not made any changes to its plan for that so far, so it is possible that the drop in mortgage rates will be brief. Lower mortgage rates will continue to put upward pressure on home prices, especially given the drastic imbalance of record low supply and strong demand.