In March, the trajectory of mortgage rates humbled forecasters.
Mortgage rates fell in late February as the COVID-19 pandemic spread. The forecast for March seemed logical: Mortgage rates would continue falling if the epidemic worsened in the United States.
Instead, mortgage rates went up dramatically in March.
The forecast for April calls for fixed mortgage rates to fall below the levels seen in March, as the Federal Reserve restores stability.
The Fed clearly intends to steady mortgage rates. If it succeeds, the 30-year mortgage could settle at around 3.5% or lower through April, giving more homeowners an opportunity to refinance.
Low and steady rates would please home buyers, too — those who brave the housing market during an epidemic.
In NerdWallet's daily mortgage survey, the 30-year fixed-rate mortgage averaged 3.373% APR on Feb. 28.
It moved upward but lingered below 3.5% for a week and a half. It rose further on March 10, reaching the month's high of 4.113% on March 20.
That was a jump of about three-quarters of a percentage point in just three weeks.
Rates went up during that period because of turbulence in bond markets. Bondholders sold their bonds to stockpile cash.
These sales depressed bond prices, including prices for mortgage-backed securities, which pushed mortgage rates higher.
In addition to dealing with a topsy-turvy bond market, mortgage lenders had to get a handle on a gigantic surge of refinance applications in late February and early March after mortgage rates fell dramatically.
Most lenders were swamped with as many applications as their staffs could handle. As they reached capacity, they raised rates to temporarily discourage customers.
The Federal Reserve can't increase lenders' capacity to process loan applications, but it does have tools to stop the cycle of falling bond prices. The central bank's first effort was March 15, when it pledged to buy at least $200 billion in mortgage-backed securities over the coming months.
The Fed ended up buying nearly half that allotment in just a week.
Round two began March 23, when the Fed announced that it would spend as much money on mortgage-backed securities as necessary "to support smooth market functioning."
The Fed has shown that it will buy astonishing quantities of mortgage bonds to bring stability to mortgage rates. It seems like a safe bet that it will succeed. But this has been an unpredictable year. The sell-by date on predictions is short. For rate forecasters, humility is in high demand.
E-mail: hlewis@nerdwallet.com. Twitter: @HoldenL.
