By Nathalie Voit

Mortgage rates fell for the second week in a row as geopolitical tensions caused by the Russia-Ukraine conflict prompted investors to turn to the safety of government bonds and away from real estate investments, U.S. mortgage giant Freddie Mac said in a statement.

The 30-year fixed-rate mortgage was 3.76% for the week ending March 2, down from last week’s 3.89% weekly average. The average for a 30-year loan was the lowest since January, according to data from Freddie Mac.

“While inflationary pressures remain, the cascading impacts of the war in Ukraine have created market uncertainty. Consequently, rates are expected to stay low in the short-term but will likely increase in the coming months,” the experts at Freddie Mac said.

Falling mortgage rates are a welcome reprieve for would-be homebuyers, who for months now have had to deal with rapidly rising mortgage rates brought on by the expectation of hawkish Fed intervention. On top of an already red-hot housing market, soaring mortgage rates have pushed many Americans out of the market.

According to real estate data analytics firm Attom Data Solutions, applications for new home loans were down 13% from one year ago in the fourth quarter, the largest annual decrease in almost three years. Additionally, total loan originations were down for the third quarter in a row as thousands forgoed refinancing, Attom said.

“The receding volume of business for the residential mortgage industry is now showing up across all major categories of loans and appears to be more than just a temporary slide. The ebbing wave of refinance loan that started in early 2021 has fully spread to home-purchase and home-equity lending,” said chief product officer at ATTOM Todd Teta.

“No doubt, total lending levels are still up over normal amounts over the past decade. And the drop-off in purchase loans seems to flow from a lack of housing supply rather than the housing market boom ending. But declining business for lenders remains a key point to watch in assessing the state of the market, especially with interest rates likely to climb this year.”

Ongoing uncertainty in the geopolitical arena is expected to keep rates low in the short term. However, borrowing costs will likely increase heading into the year due to ongoing inflation and the central bank’s planned rate hikes, said associate vice president of economic and industry forecasting for the Mortgage Bankers Association Joel Kan, according to Bloomberg.

Regarding the Russia-Ukraine war, Kan acknowledged he couldn’t identify when the crisis would end.

“We don’t know how long the conflict is going to last,” he said. “It’s added more volatility to what was already uncertain time for markets.