By Nathalie Voit

Higher interest rates are affecting the home refinance market. Following a short drop in rates due to initial news of the Omicron COVID-19 variant, mortgage rates resumed their upward climb this week, settling at 3.30% for a 30-year fixed-rate mortgage with a conforming loan limit of $548,250 or less, the Mortgage Bankers Association said.

“Discount points” also remained constant at 0.39 for loans with a 20% down payment, MBA said, according to CNBC.

The higher interest rates are prompting fewer homeowners to refinance. The share of Americans looking to refinance a home dropped 6% for the week and was 41%, or 45 basis points lower, than during the same period last year, according to the MBA’s seasonally adjusted index, CNBC said.

“Fewer homeowners have a strong incentive to refinance at current rates,” said MBA economist Joel Kan.

According to Black Knight, a mortgage data and analytics company, one in four borrowers has rates lower than 3%, with most borrowers falling between 3% and 3.5%. For refinancing to pay off, homeowners would have to secure a rate about 50 basis points lower than their current rate.

Meanwhile, applications to take out a home mortgage rose just 1% week over week and were 9% lower than during the same week one year ago.

Mortgage rates have mostly held steady this week, although that may change depending on how aggressively the Fed attempts to counter inflation.

The central bank is set to announce monetary policy changes today.

“The Fed will most likely announce a faster wind-down of its bond-buying programs. The targeted end date for bond-buying will tacitly suggest the time frame in which the Fed is thinking about hiking rates for the first time since cutting them to zero at the start of the pandemic,” said Matthew Graham, chief operating officer at Mortgage News Daily.

“Bottom line: be prepared for volatility tomorrow afternoon. That means the mortgage rates seen in the morning could look drastically different from those seen at the end of the day,” he said.