Rising coronavirus instances result in falling mortgage charges

The recent surge in new coronavirus cases has helped drive mortgage rates to their lowest level in over a month, according to Freddie Mac.

According to Freddie Mac's Primary Mortgage Market Survey, the 30-year fixed rate mortgage average for the weekly period ended December 23rd decreased to 3.05%. The decline comes after the 30-year rate had hovered near the 3.1% mark since mid-November. A week ago, the 30-year average was seven basis points higher at 3.12%, while over the same seven-day period in 2020 it was 2.66%.

"The market volatility that results from the Omicron variant of COVID-19 is causing mortgage rates to fall," said Sam Khater, Freddie Mac's chief economist.

The 7-day weekly average of new cases rose sharply in the first half of the month, with the total number of cases in the US now exceeding 50 million, according to the Centers for Disease Control and Prevention. The surge in new cases coincides with the advent of the Omicron variant, which is the dominant strain in the United States today.

Market concerns about the new variant mitigated any impact of last week's Federal Reserve announcements, news that usually put upward pressure on interest rates. After a meeting of the US Federal Reserve's Open Market Committee, the central bank signaled that it would accelerate its asset purchase program "in view of the inflationary trend and the further improvement in the labor market". The Fed will slow its asset purchases by $ 20 billion in government bonds and $ 10 billion in agency mortgage-backed securities. In January, total monthly government bond purchases will drop to $ 40 billion per month and to $ 20 billion per month for MBS assets.

"The committee believes that a similar reduction in the pace of net asset purchases is likely to be appropriate each month, but stands ready to adjust the pace of purchases if warranted by changes in the economic outlook," the Federal Reserve said in a press release.

While the Omicron variant unsettled the housing market and the direction of interest rate developments, strong demand continued to stimulate sales. "At the end of the year, the housing market is developing steadily," said Khater. "However, interest rates are expected to rise in 2022, which will affect home buyer demand as well as refinancing activity."

Along with the decline in the 30-year rate, the 15-year average also fell, falling four basis points from 2.34% a week earlier to 2.3%. A year ago, the 15-year average was 2.19%.

The 5-year Treasury-indexed adjustable rate mortgage also fell 8 basis points to 2.37% from 2.45% the previous week. At the same time last year, the 5-year ARM averaged 2.79%.

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