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Mortgage Rates Increase Despite Omicron Spike

By Zillow Research on Jan. 5, 2022



Mortgage rates increased over the last two weeks of December.

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. Most indicators continue to point to inflationary pressures, with tight labor markets and challenges in addressing supply chain issues. 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. The Federal Open Market Committee (FOMC) minutes released today indicate a more hawkish Fed that may raise rates sooner and potentially shrink their balance sheet faster. These indications are putting additional upward pressure on interest rates.

Jobless claims and employment data coming out later this week will be scrutinized for any indications that may point to the Federal Reserve having room to be more aggressive in fighting inflation.

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