Russia’s invasion of Ukraine has reportedly caused mortgage interest rates to fall. Due to this, more people could become interested in applying for a home loan. Experts are continuing to assess the potential impact that this drop in interest rates could have.
On Tuesday, March 1, the yield on the 10-year Treasury declined by 0.128 percentage points, to 1.708%. The yield has been down for two consecutive trading days, according to the Dow Jones Market Data Group. Soon, this change will be seen in mortgage rates.
Russia invading Ukraine has caused changes in many markets, so it’s unclear how this will play out long-term.
Mortgage Interest Rates Fall, But Demand Is Still Low
It’s likely that we’ll see an increase in mortgage applications when this change is reflected. For now, the number of buyers has remained relatively low. This is due to the current high mortgage rates. In fact, demand for applications fell by 0.7% this week, compared to the week before. This data comes from a weekly survey conducted by the Mortgage Bankers Association.
“Mortgage rates last week reached multi-year highs, putting a damper on applications activity,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “The 30-year fixed rate reached its highest level since 2019 at 4.15%, and the refinance share of applications dipped below 50%.”
“Purchase activity remained weak, but the average loan size increased again, which indicates that home-price growth remains strong, and a greater share of the activity is occurring at the higher end of the market,” Kan added.
According to Fox Business, the Mortgage Bankers Association survey covers over 75% of all U.S. retail residential mortgage applications. It has been conducted weekly since 1990.
Mortgage Applications Have Been At Their Lowest Since 2019
For three straight weeks in February, purchase applications dropped. By the end of February, total mortgage applications had decreased by a whopping 13.1%. That drop put application levels at their lowest since December 2019, according to the MBA.
On top of that, refinancing applications also had a steep drop. They went down by 15% at the end of last month. As if that wasn’t a steep enough drop, their yearly numbers are also looking bad. Applications for refinancing are down 565% year-over-year.
Interest rates are just one factor in this. Low inventory and sky-high home prices have also caused a decrease in applications.
There’s only one homebuying metric that has stayed more or less the same. The average purchase loan size is currently at an all-time high. According to the MBA, the average loan size across the country right now is a whopping $450,200. That’s down a little bit from early February, which saw it rise to $453,000.
Now that mortgage interest rates are beginning to fall, things should look up. However, inventory and home price will still be deciding factors for many when it comes to buying a house.