Omicron concerns drive mortgage rates down; 30 years at 3.05%

WASHINGTON – Fears over the economic fallout from the omicron variant pushed US long-term mortgage rates down this week.

Mortgage buyer Freddie Mac reported Thursday that the 30-year average benchmark mortgage rate fell to 3.05% this week, from 3.12% last week. A year ago, the 30-year rate stood at 2.66%.

The average rate on 15-year fixed-rate mortgages, popular among those refinancing their homes, fell to 2.3% from 2.34% last week. It was 2.19% a year ago.

Rates have fallen despite unusually high inflation as financial markets fear that Omicron could weigh on economic growth by forcing closings and cancellations, discouraging Americans from going out to shop, eat and drink.

Low mortgage rates contribute to the strength of the housing market, where demand exceeds supply and prices rise sharply.

The Federal Reserve announced last week that it would start cutting back on its monthly bond purchases – which are aimed at lowering long-term rates – to combat accelerating inflation. This move could increase borrowing costs across the economy in the coming months.

“As the year draws to a close, the housing market is advancing steadily,” said Sam Khater, chief economist at Freddie Mac. “However, rates are expected to increase in 2022, which will impact buyer demand as well as refinancing activity.”

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