Associated Press

WASHINGTON – Average long-term U.S. mortgage rates rose in the past week to start the new year. They reached their highest level since May 2020, at the height of the coronavirus pandemic, yet remained historically low.

Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year home loan increased to 3.22% this week from 3.11% the week before. A year ago, the 30-year rate stood at 2.65%.

The average rate on 15-year, fixed-rate mortgages, popular among those refinancing their homes, rose to 2.43% from 2.33% the prior week.

Many economists expect mortgage rates to increase this year after the Federal Reserve announced last month that it would begin dialing back its monthly bond purchases – which are intended to lower long-term rates – to tamp down accelerating inflation. But even with the expected three rate increases in 2022, the Fed’s benchmark rate would still sit below 1%.

In addition to stronger inflation, experts expect robust economic growth and the tight labor market to continue to push rates higher. The government reported Thursday that the number of Americans applying for unemployment benefits increased the preceding week but remained at historically low levels, suggesting that the job market remains strong. U.S. jobless claims rose by 7,000 last week to 207,000.

The highly transmissible omicron variant so far does not appear to have triggered significant layoffs.

Employers are reluctant to let workers go at a time when it’s so tough to find replacements. The U.S. posted 10.6 million job openings in November, the fifth-highest monthly total in records reaching back to 2000. A record 4.5 million Americans quit their jobs in the “Great Resignation” in November – a sign that they are confident enough in their prospects to seek something better.

The job market has bounced back from last year’s brief but intense coronavirus recession. When COVID hit, governments ordered lockdowns, consumers hunkered down at home and many businesses closed or cut back hours. Employers slashed more than 22 million jobs in March and April 2020, and the unemployment rate rocketed to 14.8%.