Housing experts saw the worst of the coronavirus outbreak in the rearview mirror as Thanksgiving approached, and nothing but rising mortgage rates ahead.
However, the emergence of the omicron variety has added to the uncertainty surrounding mortgage rates.
Concerns over a return of coronavirus cases have weighed on global markets and U.S. Treasury yields, which have fallen sharply since Tuesday morning.
The 10-year Treasury note yield dropped roughly 10 basis points to 1.431 percent.
Yields were in the 1.65 percent area last week.
Because 30-year mortgage rates are closely linked to 10-year Treasury yields, this matters to homeowners and homebuyers.
According to Bankrate’s national survey of lenders, the average rate on a 30-year loan was 3.24 percent last week, up from an all-time low of 2.93 percent in January.
According to some mortgage experts, the pandemic’s latest twist will lower mortgage rates.
“For the time being, it’s all about omicron,” says Joel Naroff, an economist.
“COVID will not be forgotten any time soon.”
Mortgage rates are also expected to reverse course, according to Ken H. Johnson, a housing economist at Florida Atlantic University.
“Uncertainty about the omicron variant’s impact and the possibility of rising inflation is driving a lot of money to safe haven investments like mortgage bonds, 10-year Treasury notes, and other safe haven investments,” he says.
Mortgage rates were set to rise before the omicron variety made headlines.
The Federal Reserve unveiled its long-awaited “taper” of asset purchases earlier this month. While the move puts upward pressure on mortgage rates, the taper is unlikely to cause them to rise.
The Fed’s shifting approach, on the other hand, does pave the way for a gradual rate hike.
Rates are expected to climb by the end of 2022, according to economists.
Reduced purchasing power may relieve some of the pressure on home prices as mortgage rates slowly climb to the 3.5 percent area.
Meanwhile, Federal Reserve Chairman Jerome Powell told a congressional committee on Tuesday that the central bank’s bond and mortgage-backed securities purchases would be tapered sooner than expected.
“It is therefore acceptable in my judgment to contemplate winding up the taper of our asset purchases… possibly a few months sooner,” Powell added, citing the “very strong” economy.
As a means of combating the coronavirus recession, the Fed increased asset purchases.
However, the “taper” is projected to push mortgage rates higher.