Omicron variant drives decrease in mortgage rates: Freddie Mac

Real estate markets remain “unseasonably lively”

Mortgage rates dropped in the week leading up to Christmas as fears of the omicron variant rose.  (iStock)

Mortgage interest rates dropped after the COVID-19 omicron variant began spreading across the U.S., according to the latest data from Freddie Mac. 

"Market volatility" caused the 30-year mortgage to drop seven percentage points – to 3.05% APR – for the week ending Dec. 23, 2021.

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

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Housing market awaits omicron effects

The 15-year conventional loan rate also dropped the week before Christmas, to 2.3%. This was a drop from 2.34% the week prior, but up from 2.19% at the same time last year. The five-year Treasury indexed hybrid adjustable-rate mortgage also fell to 2.37%, compared to 2.45% last week and 2.79% the same time in 2020.

"Investors kept a cautious wait-and-see approach to the omicron variant, as signals point to higher levels of contagion, but lower levels of sever symptoms," said George Ratiu,'s manager of economic research. "In positive news, this week saw an upward revision to third quarter GDP and an increase in existing home sales, pointing to an active market in a historically slower season."

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Real estate markets remain "unseasonably lively" through holidays

Despite the expected downturn to the housing market during the holiday season, looming 2022 interest rate hikes have kept the industry active for potential borrowers.

"As we enter the holiday season and many families look forward to celebrations and a slight respite from another challenging year, real estate markets remain unseasonably lively," Ratiu said. "Buyers continue to close contracts for both new and existing homes, hurrying to lock in low mortgage rates before they rise. The combination of rising inflation and the Federal Reserve’s accelerated tapering of mortgage-backed securities purchases is expected to push interest rates higher in 2022, trimming many buyers’ budgets."

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