Rates Rise To Highest Level Since May 2020

Mortgage rates rose to their highest level since May 2020, up to an average of 3.22%, Freddie Mac reported Thursday.

Freddie’s Primary Mortgage Market Survey (PMMS) found that the 30-year fixed-rate mortgage (FRM) averaged 3.22%, significantly higher than last week’s 3.11%. It disrupts a trend of rates hovering around 3.10% or 3.11%. A year ago at this time, the 30-year FRM averaged 2.65%.

“Mortgage rates increased during the first week of 2022 to the highest level since May 2020 and are more than half a percent higher than January 2021,” said Sam Khater, Freddie Mac’s Chief Economist. 

“With higher inflation, promising economic growth, and a tight labor market, we expect rates will continue to rise. The impact of higher rates on purchase demand remains modest so far given the current first-time homebuyer growth.”

Stocks turned sharply this week when minutes of the Federal Reserve’s December 14-15 meeting suggested rate hikes could come “sooner or at a faster pace than participants had earlier anticipated.” 

Analysts expect those increases in March. In the same meeting, officials approved a plan to end asset purchases in March instead of June.

Some analysts have suggested that rising rates may help moderate sky-high home prices. But Erin Lantz, vice president of mortgages at Zillow, noted that increases might not lead to less demand.

“While those looking to buy a home are understandably concerned about the path of rates ahead, it’s important to remember that borrowing costs remain exceptionally low by historical standards,” she told CNBC. 

“Rising rates may impact the location or size of the home they hope to purchase, but buyers that are fully committed to buying a home are unlikely to be swayed by the FOMC’s decision to raise rates.”

Additional findings from Thursday’s report:

  • 15-year fixed-rate mortgage averaged 2.43% with an average 0.6 point.
  • A year ago at this time, the 15-year FRM averaged 2.16%.
  • 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.41% with an average 0.5 point, unchanged from last week.
  • A year ago at this time, the 5-year ARM averaged 2.75%.