There has been a great deal of volatility in mortgage rates in recent months, especially due to the ongoing impact of the Coronavirus pandemic and rising inflation.
Most recently, mortgage rates seem to have been going down but it is debatable how long these drops will last. Here, Octagon Capital explores the latest on the falling mortgage rates, including:
- What’s happened to mortgage rates in recent months
- Whether mortgage rates are actually falling
- The impact of COVID-19 on rates
And more…
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What Has Happened to Mortgage Rates in Recent Months?
Despite expert predictions that inflation would cause mortgage rates to be pushed higher, recent months have seen the mortgage rate fluctuating up and down but with no real changes.
The average interest rate on the 30-year fixed-rate mortgage for November was almost identical to that of October, despite inflation rising to 6.2%.
Are Mortgage Rates Falling?
Looking at the last few weeks, mortgage rates have been falling but by a negligible amount. Data shows that the average contract interest rate for 30-year fixed-rate mortgages decreased from 3.24% to 3.16%.
For a 15-year fixed-rate mortgage, rates dropped by seven basis points to 2.271% APR, according to data from NerdWallet.
In general, the 30-year mortgage has been fluctuating in recent months but has generally demonstrated an upward trajectory, assisted by high inflation rates and rising employment.
The recent drop in fixed mortgage rates is largely due to the omicron variant of the coronavirus.
Due to the falling rates, mortgage application volume increased 5.5% (week on week) according to data from the Mortgage Bankers Association. When mortgage rates drop, it also helps to boost refinance demand.
Increased Demand for Refinance and Mortgage Applications
As a direct result of falling mortgage rates, there has been an increase for refinance demand (7% increase week-over-week). However, when comparing the figures to 2020, it was 28% lower.
Mortgage applications to purchase a home also increased following the drop in mortgage rates. This figure increased by 3% (week-over-week) but was 4% lower than the same week in 2020.
Although the drop in mortgage rates is brief, the increase in mortgage applications and demand for refinancing shows how sensitive the market is to these small changes and how buyers can be brought back.
End of 2021
In the end weeks of 2021, the majority of mortgage experts predicted that mortgage rates will rise again (73% of mortgage experts surveyed in Bankrate’s weekly poll).
18% of experts thought that the mortgage rate would remain steady over these last weeks of 2021 leading up to the end of the year. A small proportion of experts (9%) predicted that the mortgage rates would continue to drop.
The Impact of COVID
As we have seen from the changing mortgage rates in recent weeks, the emergence of the omicron variant has led to market volatility and a small drop in mortgage rates.
The new wave of COVID cases and its variants is thought to put downward pressure on economic progress and mortgage interest rates.
However, according to the Federal Reserve, this economic slowdown is likely to be short-term only. In general, experts are predicting that rates will continue to be volatile but that rising mortgage rates will be the long-term trend going into 2022.
Mortgage Rates in 2022
As we come further out of the pandemic, mortgage rates are predicted to climb throughout 2022. Below are some facts on mortgage rates throughout the pandemic and into the new year:
- Mortgage rates are not set to go down in 2022
- In 2020-2021, the COVID pandemic directly affected mortgage rates
- Mortgage rates during 2020-2021 were ultra-low
- The ultra-low mortgage rates benefited many homeowners and buyers
With inflation predicted to remain elevated, it seems as though short-term interest rates will also be raised in the new year. Experts from the Mortgage Bankers Association and the National Association of Realtors forecast that the 30-year fixed-rate mortgage will rise about three-eights of a percentage point as we enter 2022 leading to a rate of just under 3.5%.
