As omicron triggers market volatility, mortgage rates decline

Buyers who locked in mortgage rates this week got a bit of a reprieve as they continued to race to get ahead of the long-term rate increases to come. The average rate for a 30-year mortgage fell to 3.05 percent, down 7 basis points from the week before, according to Freddie Mac’s most recent lender survey. “The market volatility resulting from the COVID-19 Omicron variant is causing mortgage rates to decrease,” Freddie Mac Chief Economist Sam Khater said in a statement. “As the year comes to a close, the housing market is proceeding steadily. However, rates are expected to increase in 2022 which will impact homebuyer demand as well as refinance activity.” For the week ending Dec. 23, Freddie Mac’s weekly Primary Mortgage Market Survey reported average rates for the following types of loans:

• For 30-year fixed-rate mortgages, rates averaged 3.05 percent with an average 0.7 point, down from last week’s 3.12 percent figure but well above its 2.66 percent mark from a year ago. Rates for 30-year loans hit an all-time low of 2.65 percent during the week ending Jan. 7, 2021, according to records dating to 1971.
• Rates for 15-year fixed-rate mortgages averaged 2.30 percent with an average 0.7 point, down from last week’s 2.34 percent and higher than its 2.19 percent mark a year ago. The all-time low rate for 15-year loans was 2.10 percent set the week ending Aug. 5, 2021, according to records dating to 1991.
• For 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.37 percent with an average 0.4 point, down from its 2.45 percent rate last week and remaining well below the 2.79 percent rate from a year ago. Rates on 5-year ARM loans are still hovering above the record-low 2.40 percent rate set during the week ending Aug. 5, 2021.

The survey results reflect rates for borrowers with excellent credit who put down 20 percent on a home. The average rate factors in the average discount points as well. Borrowers with lower scores, or different point assumptions, can expect different rates. The dip in mortgage rates follows a general upward trend that’s seen rates for 30-year loans rise from below 2.9 percent before Thanksgiving to their current levels today. But the prospects of rates rising even higher have kept buyers very much in the hunt for homes in recent weeks, according to George Ratiu, manager of economic research for realtor.com. “The combination of rising inflation and the Federal Reserve’s accelerated tapering of mortgage-backed securities purchases is expected to push interest rates higher in 2022, trimming many buyers’ budgets,” Ratiu said in a statement. “Realtor.com’s weekly data show prices picking up speed in December as new listings slow, a likely result of many homeowners postponing sale plans until after the holidays.” The Federal Reserve’s scale-back of monthly support for the U.S. economy kicked into higher gear last week, as officials committed to a faster pace for tapering. Freddie Mac’s survey results were the first to be released since the Fed’s decision to speed up the process, and since the Omicron variant of the coronavirus really started to pick up steam in the U.S. Despite the disruption caused by Omicron, however, Fed officials appear to be more concerned with threats that consumer-price inflation pose to the economy as it recovers from the financial impacts of the pandemic. As the economy continues to dig its way out of the hole, today’s still-low mortgage rates are expected to become a thing of the past. National Association of Realtors Chief Economist Lawrence Yun anticipates the 30-year fixed mortgage rate to settle around 3.7 percent by the end of 2022, and numbers from the Mortgage Bankers Association also anticipate an upward shift in the coming months.