‘Home shoppers should be prepared for a bit less calm’: Mortgage rates could turn volatile in the coming weeks — here’s why

Gird your loins, home buyers, because mortgage rates could turn volatile in the coming weeks.

The 30-year fixed-rate mortgage averaged 3.55% for the week ending Feb. 3, unchanged from the previous week, Freddie Mac
FMCC,
-1.98%
  reported Thursday. The 15-year fixed-rate mortgage, meanwhile, dropped three basis points to an average of 2.77%. The 5-year Treasury-indexed adjustable-rate mortgage averaged 2.71%, up one basis point from the previous week.

It’s the third consecutive week in which mortgage rates have barely moved — at least judging from the weekly average. But under the hood, the situation already is a bit more tumultuous.

“The apparent stability in weekly rates averages out some bigger day-to-day swings in both mortgage and other long-term rates, so home shoppers should be prepared for a bit less calm than the weekly data suggest,” said Danielle Hale, chief economist at Realtor.com.

The past couple weeks are a good example of that. Interest rates spiked in the middle of last week in reaction to signals from the Federal Reserve that a rate hike is imminent, said Zillow
Z,
-2.51%
ZG,
-2.99%
vice president of capital markets Paul Thomas. But rates settled lower in the days since.

Overall, upcoming economic data may keep a damper on 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 subside in the coming months,” Sam Khater, Freddie Mac’s chief economist, said in the weekly report. If the economy rebounds, as expected, this spring and summer, then Khater anticipates mortgage rates will move higher again.

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

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

“These conditions can be especially challenging for first-time homebuyers already grappling with rising rents that make it difficult to save for a down payment,” she added.

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