Omicron worries push mortgage rates down; 30-year at 3.05%

Omicron | Representative image

Fears about the economic fallout from the omicron variant pushed long-term U.S. mortgage rates lower this week.

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

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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 fell despite unusually high inflation because financial markets are worried that omicron will weigh on economic growth by forcing lockdowns and cancellations, discouraging Americans from going out to shop, eat and drink.

Low mortgage rates are contributed to a strong housing market, where demand outstrips supply and prices are rising sharply.

The Federal Reserve announced last week that it would begin dialing back its monthly bond purchases which are intended to lower long-term rates to combat accelerating inflation. That move could raise borrowing costs across the economy in the coming months.

As the year comes to a close, the housing market is proceeding steadily,'' said Sam Khater, chief economist at Freddie Mac. However, rates are expected to increase in 2022 which will impact homebuyer demand as well as refinance activity.