Mortgage rates rise as omicron fears ease, but remain at historic lows

Mortgage rates rose slightly as investors grow less concerned about the COVID-19 omicron variant and its disruptions.  (iStock)

Mortgage interest rates increased at the end of 2021 as new economic data indicated that the U.S. economy is in a good state despite the rapid spread of the coronavirus' omicron variant, according to the latest data from Freddie Mac.

The 30-year fixed-rate mortgage grew to an annual percentage rate (APR) of 3.11% for the week ending Dec. 30, 2021, according to the mortgage giant's Primary Mortgage Market Survey. This is up from 3.05% the week before and from 2.67% the same time last year.

"Mortgage rates have effectively been moving sideways despite the increase in new COVID cases," Freddie Mac Chief Economist Sam Khater said. "This is because incoming economic data suggests that the economy remains on firm ground, particularly cyclical industries like manufacturing and housing. 

"Moreover, low interest rates and high asset valuations continue to drive consumer spending," Khater said. "While we do expect rates to rise, the push of the first-time homebuyer demographic that’s been propelling the purchase market will continue in 2022 and beyond."

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Rising mortgage rates could mean good news for homebuyers

In addition to the rate increase of the 30-year mortgage, rates also rose for the 15-year mortgage and others over the past week. The 15-year fixed-rate mortgage averaged 2.33%, up from the previous week’s 2.3% and from 2.17% last year. The five-year Treasury-indexed hybrid adjustable-rate mortgage also rose, increasing to 2.41% from 2.37% last week but down from 2.71% last year. 

"Investors have reacted with increasing optimism following initial caution in response to the emergence of the omicron variant, even as case counts grow," Chief Economist Danielle Hale said. "This is reflected not only in stocks hitting record highs, but also in rates for 10-year Treasuries, which surpassed a 1.5% yield on [Jan. 5, 2022] for only the second time in December."

These increases have led to higher mortgage rates, which could turn out to be good news for potential homebuyers, Hale explained. 

"If higher rates in longer-term Treasuries can be sustained, which will likely require stable or improving news around omicron and COVID, that will mean higher mortgage rates for homebuyers," she said. "However, this will also likely mean a strong economic backdrop in the form of favorable job market dynamics that will help homebuyers better face the hurdle of higher housing costs."

If you are interested in buying a home or refinancing your current loan to save money on your mortgage payments, visit Credible to compare multiple lenders and choose the right lender with the lowest rate for you.


Homebuyers could hasten plans to buy as rates rise

While rising rates could benefit homebuyers, borrowers might also want to consider buying sooner rather than later. Homeowners can refinance while interest rates remain at historic lows, saving up to hundreds on their monthly mortgage payments. 

"With rates and home prices both rising, hopeful buyers will need to be prepared to contend with today’s housing market," Hale said. "In addition to rising costs, buyers will likely face stiff competition, especially early in 2022, as rising mortgage rates spur some to hasten home-buying plans."

If you are interested in buying or refinancing your mortgage to lower your monthly payments with the current mortgage rates, contact Credible to speak to a home loan expert and get all of your questions answered.

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