‘Home buyers should be prepared for a little less calm’: Mortgage rates could turn volatile in the coming weeks – here’s why

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Buckle up, homebuyers, as mortgage rates could become volatile over the next few weeks.

The 30-year fixed-rate mortgage averaged 3.55% for the week ending Feb. 3, unchanged from the previous week, Freddie Mac FMCC,
+0.07%
reported Thursday. The 15-year fixed rate mortgage, meanwhile, fell three basis points to an average of 2.77%. The 5-year Treasury-indexed variable-rate mortgage averaged 2.71%, up one basis point from the previous week.

This is the third straight week in which mortgage rates have barely moved, at least judging by the weekly average. But under the hood, the situation is already a little more tumultuous.

“The apparent stability in weekly rates corresponds with larger daily swings in mortgage rates and other long-term rates, so homebuyers should be prepared for a little less calm than the weekly data suggests,” said Danielle Hale, chef. economist at Realtor.com.

The last few weeks are a good example. Interest rates soared in the middle of last week in response to signals from the Federal Reserve that a rate hike is imminent, Zillow Z said,
-1.81%
ZG,
-2.25%
Vice President of Capital Markets Paul Thomas. But rates stabilized lower in the days that followed.

Overall, the upcoming economic data could dampen interest rates as economists anticipate less than stellar numbers for January. “This stagnation reflects the economic impact of the omicron variant of COVID-19, which we believe will ease in the coming months,” Sam Khater, chief economist at Freddie Mac, said in the weekly report. If the economy rebounds, as expected, this spring and summer, then Khater expects mortgage rates to rise again.

In the meantime, economists have warned that Americans could see a higher degree of interest rate volatility in the coming weeks as new economic data is released. Additionally, the ongoing geopolitical tensions surrounding Ukraine could create uncertainty among investors, which could affect the direction in which interest rates move.

Homebuyers, so far, are undeterred. “Housing data indicated that rising mortgage rates are creating a sense of urgency, rather than deterring potential buyers, and prices continue to rise as the few homes available for sale snap up quickly” , Hale said.

“These conditions can be particularly difficult for first-time home buyers already struggling with rising rents that make it difficult to save for a down payment,” she added.

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