Mortgage rates hit their highest point since May 2020

As 2022 kicked off, the 30-year mortgage rate average jumped to its highest level since May of 2020

The 30-year fixed rate came in at 3.22% for the weekly period ending Jan. 6, up 11 basis points from 3.11% seven days earlier, according to the Freddie Mac Primary Mortgage Market Survey. The latest rate is more than 50 basis points above the first-week average from 2021, when it dropped to a record low of 2.65%.

Rates headed upward for the third time in four weeks, as investors appeared to view news of rising infection rates as a temporary speed bump, rather than a long-term cause for concern. “With little economic data during a slow holiday week, markets seem to be pricing in continued economic recovery, despite COVID cases spiking due to the omicron variant,” said Paul Thomas, Zillow vice president of capital markets, in a blog post.

“Market participants appear to be optimistic that the new COVID case surge will not be as impactful to economic activity as prior waves, but still wary that potential shutdowns could slow economic growth,” he added.

Investors will be closely watching numbers from the Labor Department’s December jobs report, scheduled for release Friday, for any warning signs of a slowdown.

The release of minutes from the Federal Open Market Committee’s December meeting this week also pointed to signs that the rising rate trend would likely continue. At the meeting, where the central bank announced it would accelerate its taper of asset purchases, committee members also unanimously indicated that they expected the federal funds rate would need to be raised this year.

Other data are also sending similar signals, according to 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,” he said in a press release.

Khater also noted that increased rates thus far seemed to be having little effect on cooling the housing market. “The impact of higher rates on purchase demand remains modest so far given the current first-time home-buyer growth.”

The 15-year fixed-rate also spiked to begin the year, rising to a level not seen since November. The rate averaged 2.43%, up from 2.33% one week earlier. A year ago, the 15-year average came in at 2.16%.

The average 5-year Treasury-indexed adjustable-rate mortgage remained at 2.41% for the second week in a row. In the first week of 2021, the 5/1 ARM averaged 2.75%.