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Mortgage Rates Plummet After News of Omicron Variant

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Mortgage Rates Plummet After News of Omicron Variant

After a major decline in refinance activity with high mortgage rates, a new COVID-19 variant could cause a swift reversal

December 1, 2021
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Image: Stock.adobe.com

Mortgage rates rose substantially during the week of Thanksgiving, causing a 15% decline in applications to refinance a home loan, CNBC reports. When news of the omicron variant was released on Friday, however, rates immediately began to drop. By Tuesday, the 30-year fixed average rate fell 15 basis points, a reversal partially caused by congressional testimony pushing the bond market in the opposite direction after three straight weeks of growth.

Last week the average rate on the 30-year mortgage with conforming loan balance ($548,250 or less) increased to 3.31% from 3.24%, with points rising to 0.43 from 0.36 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association. That is the highest rate since April of this year. The rate was 39 basis points lower one year ago.

The increase in rates caused applications to refinance a home loan to drop 15% for the week, seasonally adjusted. An additional adjustment was made for the Thanksgiving holiday. Refinance demand was 41% lower than the same week one year ago. The refinance share of mortgage activity decreased to 59.4% of total applications from 63.1% the previous week.

While rates rose for much of last week, they made a swift reversal on Friday, when news hit of the omicron variant. By Tuesday the average rate on the 30-year fixed had fallen 15 basis points, according to Mortgage News Daily.

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