DENVER, CO – During the worst of the COVID-19 pandemic, average long-term U.S. mortgage rates fell to historically-low levels – well below 3% at some points – driving many would-be homeowners to purchase new houses due to incredibly cheap borrowing costs. However, all good things must eventually come to an end, and while mortgage rates are still far lower than they were before the pandemic hit, they have nonetheless showed signs of creeping upward ever-so-slightly.
As of the new year, mortgage rates hit their highest level since May 2020; however, while they are remain very low, experts indicate that the level of growth they’re showing means that cheap money for home purchases should still be a reality for at least a good portion of 2022.
On Thursday, mortgage buyer Freddie Mac reported that the average rate on 30-year home loans increased to 3.22%, up from 3.11% just one week ago; during the same period of time one year prior, that 30-year rate was a shockingly low 2.65%.
When it comes to 15-year, fixed-rate mortgages – which many people utilize when it comes to refinancing their current home loans – the average rate jumped only slightly from 2.33% last week to 2.43% as of Thursday.
The Federal Reserve announced last month that they would begin decreasing their monthly bond purchases, which they have been doing in an effort to lower long-term rates; the reason for the purchasing decrease was to combat steadily-increasing inflation rates that have been occurring. However, despite an anticipated three rate increase slated to take place throughout 2022, the benchmark rate of the Federal Reserve would still be hovering under the 1% mark.
But in addition to the Fed’s decreased monthly bond purchases, current mortgage rates will likely also be influenced by an economy that is still recovering from the damage wrought by the COVID-19 pandemic; this would be in addition to a significant number of jobs being added back into the marketplace after multiple business lockdowns over the past year resulted in rampant unemployment nationwide.
While the number of Americans applying for unemployment benefits rose slightly last week – as per the U.S. government, that number jumped to 207,000, which is an increase of 7,000 – it was still at a level that was far below that was reported during the worst of the pandemic, indicating that the national job market is continuing to recover.
And despite the current surge of COVID-19 infections driven by the highly-contagious – yet milder in terms of symptoms – Omicron variant, the number of recent job losses has not risen to the level of when previous variants of the virus were far more prevalent.
As opposed to when employers were struggling to fill positions during a significant portion of the pandemic when many workers opted to stay home to continue collecting federal unemployment benefits rather than risk infection, nowadays business owners are loathe to lay anyone off for fear of the difficulty in filling those positions again.
The U.S. job market added 10.6 million openings in November 2021, the fifth-highest amount since 2000. However, the impact of the so-called “Great Resignation” – a period of time during the pandemic where numerous individuals left their jobs after a period of self-reflection in an effort to find more “fulfilling” work – effectively removed an additional 4.5 million workers from the marketplace in November, adding to the intense need of new workers by employers during that time period.
But since then, the job marketplace has surged back, and while not yet reaching pre-pandemic levels of employment – after government-mandated lockdowns and consumer uncertainty resulted in rampant business closures, an unemployment rate of 14.8%, and lasting economic damage – it is still showing signs of an upward trajectory that eventually will result in the historically-low mortgage rates that many have enjoyed begin to rise to previous levels.
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