Mortgage rates fall to 3.05% amid Omicron fears
The average 30-year-fixed rate mortgage dropped to 3.05% during the week ending Dec. 23, after achieving 3.12% the week prior, according to the latest Freddie Mac PMMS Mortgage Survey. A year ago, the 30-year fixed-rate mortgage averaged 2.66%.The 15-year-fixed-rate mortgage averaged 2.30% last week, declining from 2.34% the week prior. A year ago at this time, it averaged 2.19%. Mortgage rates tend to move in concert with the 10-year Treasury yield, which reached 1.46% on Wednesday, down from 1.47% a week before.The report is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who put 20% down and have excellent credit.Sam Khater, Freddie Mac’s chief economist, said in a statement that the COVID-19 Omicron variant is causing market volatility. Despite the decrease in rates last week, the expectation is that rates will increase in 2022.“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.”Economists expect rates to increase in 2022 but will still be close to record-low levels. The Mortgage Bankers Association (MBA) forecasts that 30-year mortgage-rates will reach 4% by the end of 2022.
The reasons for rates to climb next year are a more hawkish Federal Reserve, a strongly recovering economy, and large federal budget deficits, according to Mike Fratantoni, MBA’s senior vice president of research and industry technology.
Rising mortgage rates have already begun to sap demand. According to MBA, mortgage applications fell 0.6% for the week ending Dec. 17. The purchase index fell 3.3%, while the refinance index increased 2.2% from the week prior.
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