Mortgage rates move lower in advance of FOMC meeting

Mortgage rates again have moved lower, but given how the 10-year Treasury yield increased in the past eight days, prior to next week's Fed meeting, this might be transitory.

"Mortgage rates decreased for the second straight week as we emerged from the Thanksgiving holiday," said Sam Khater, Freddie Mac's chief economist in a press release. "Compared to this time last year, mortgage rates are half a percent lower, creating a more favorable environment for homebuyers and homeowners."

The 30-year fixed-rate mortgage averaged 6.19% for Dec. 4, the Freddie Mac Primary Mortgage Market Survey found. It was down from last week's 6.23%, as well as from a year ago, when the rate averaged 6.69%.

Also moving lower was the 15-year FRM to 5.44%, dropping 6 basis points from a week ago, when it was at 5.51%. For the same week in 2024, the 15-year mortgage averaged 5.96%.

While the 10-year yield closed at just 4% the day before Thanksgiving, it rose back to 4.09% on Dec. 1, before dropping back to 4.06% two days later.

Between preliminary data employment data from ADP, and jobless claims coming in under forecast, those are being cited for a 4 basis point rise in the morning of Dec. 4, bringing the 10-year back to 4.1% as of 11 a.m. eastern time. Now that the federal government shutdown has ended, decision makers will also have Bureau of Labor Statistics employment data which is to be released tomorrow.

Lender Price data on the National Mortgage News website priced the 30-year FRM 3 basis points higher on the day, to 6.39%.

Expectations are that the Federal Open Market Committee will undertake another short-term rate reduction at its December meeting next week, although prognosticators have been mixed on this happening.

Even with the Fed shifting towards easing monetary policy, the 10-year yield remains elevated, said First American Chief Economist Mark Fleming in his Dec. 1 commentary on the company's Data & Analytics Real House Price Index.

"Lingering inflation concerns, persistent fiscal deficits, and heavy Treasury issuance continue to push the term premium higher," Fleming said in his comments on the report. "As a result, mortgage rates have a near-term floor," pointing to industry consensus estimates for the 30-year FRM to end 2026 at 6.2%, limiting the amount of affordability relief for consumers.

"Any improvements in rates in 2026 will be incremental, not sweeping," Fleming said.

Fleming appeared with Odeta Kushi, deputy chief economist, on First American's Reconomy podcast, saying "you probably don't want your entire housing decision hanging on a single Fed meeting."

To which Kushi responded, "Whether the Fed cuts in December or waits until a later meeting, mortgage rates are still likely to be in a relatively similar range — somewhere in that mid-to-low 6% neighborhood for a while, barring a big surprise. We're not talking about going back to 3% next week, and we're also not talking about going to 8% next week."

The data is pointing to further rate cuts by the FOMC, said Nigel Green, CEO of financial advisory the deVere Group, in a commentary.

"Labor demand is weakening, consumer spending pressure is emerging, and the inflation backdrop has become far less threatening," Green said. "Policy no longer needs to remain this restrictive."

He expects U.S. bond yields to continue drifting lower as investors adjust their duration exposure and reprice future policy paths.

Next week's FOMC meeting leaves policymakers with narrowing room for any delays, adding that the economic case for a short-term rate cut is here.

"Markets are responding to the current available data," Green said. "When policy follows that reality, confidence strengthens. Hesitation carries its own risks."