Mortgage Rates Hit Highest Level Since May 2020
Home buyers bracing for higher mortgage rates in 2022 because of a shift in Federal Reserve policy got a sneak peak during the first week of January, as the 30-year mortgage rate hit its highest point in more than a year and a half.
The rate rose to 3.22% for the week of Jan. 6, Reuters reported, citing data from Freddie Mac’s primary mortgage market survey. That was up from 3.11% the week before and its highest level since May 2020.
You can expect the mortgage rate to keep pushing higher in coming months. The Fed has already signaled that it will taper its asset purchases this year, and the expectation is the central bank will have to raise overall interest rates sooner than previously thought to battle rising inflation.
“With higher inflation, promising economic growth and a tight labor market, we expect rates will continue to rise,” Freddie Mac chief economist Sam Khater said in a statement. “The impact of higher rates on purchase demand remains modest so far given the current first-time home buyer growth.”
Mortgage rates had already begun to rise in late December 2021 as markets maintained “an optimistic view of the economy,” Joel Kan, associate vice president of Economic and Industry Forecasting at the Mortgage Bankers Association, said in a Tuesday press release.
The higher rates might have contributed to a recent decline in U.S. mortgage applications. Applications during the week ending Dec. 31, 2021 fell 2.7% from two weeks earlier, the MBA reported. Those results include adjustments to account for the holidays.
“The purchase market also finished the year on a slower note, with the final week coming in at the weakest since October 2021,” Kan said. “Even though average loan sizes were lower, home-price appreciation remains at very high levels.”
Could that spell trouble for a hot housing market that saw a record year for purchase originations in 2021? Not according to Kan.
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