The mortgage industry is still weighing the impact of the latest Federal Open Market Committee short-term rate reduction on housing.
But reflecting trends prior to the meeting in the benchmark 10-year Treasury used to price mortgages, the 30-year fixed rate gained 3 basis points, while the 15-year climbed 10 basis points, the Freddie Mac Primary Mortgage Market Survey found.
"The average 30-year fixed-rate mortgage is well below the year-to-date average of 6.62%, providing some sense of balance to the housing market," said Sam Khater, Freddie Mac's chief economist, in a press release.
The current rate is also well below the over 7% high seen earlier this year, noted Samir Dedhia, CEO of One Real Mortgage.
"These improvements are directly tied to the three rate cuts the Fed has made so far in 2025, including the most recent one in December," Dedhia said in a statement. "That's the most rate reductions we've seen in a calendar year since the pandemic, and it's helped put downward pressure on borrowing costs across the board."
This week's mortgage rate movements
The 30-year FRM averaged 6.22% on Dec. 11,
Meanwhile, the 15-year FRM jumped to 5.54% from 5.44% a week prior,
"Mortgage rates drifted lower last week, then climbed and ended the week essentially flat," said Kyle Symoniak, senior vice president of capital markets at Rocket Mortgage, in a statement.
The Optimal Blue rate tracker for the 30-year conforming FRM was at 6.252% on Wednesday, essential flat from Tuesday's 6.254%. But on Dec. 4, it was at 6.166%.
John Cady, CEO and president of Citywide Home Mortgage, agreed the bigger story for what will happen going forward was the Fed's tone in its statement, as the markets are looking for clarity on the path to Fed rate cuts next year.
"For the mortgage industry, that creates opportunity," Cady said. "Consumers and lenders are eager for predictability, and if the Fed maintains this posture, we'll likely see momentum build heading into Q1."
How the Fed action affects mortgages
This week's decision-making was still feeling the impacts of the federal government shutdown. In her parsing of Fed Chairman Jerome Powell's statements, Kara Ng, senior economist at Zillow Home Loans, was of the view the board was saying it is at "a safe place to park until visibility improves.
"Further cuts would have to be supported by warning signs in upcoming economic data," Ng said in a statement.
The unknown regarding this economic data is causing concern, said Dedhia.
"Inflation isn't fully tamed, and labor market signals remain mixed," Dedhia explained. "So we're now seeing some back-and-forth in bond yields, which keeps mortgage rates hovering."
How the 10-year Treasury reacted this week
Between Dec. 3 and Dec. 9, the first day of the FOMC meeting, the 10-year Treasury yield trended higher, rising about 13 basis points during that period.
On Dec. 10, the yield opened at 4.202%. However, after the announcement of the short-term reduction, it closed at 4.164%, down from 4.186% the prior day.
Thursday morning it fell again, opening at 4.131%, dropped to a low of 4.102% before rebounding to 4.124% by 11 a.m.
Lender Price data posted on the National Mortgage News website had the 30-year FRM at 6.32% at 11 a.m. Thursday morning. This was 7 basis points lower than last week at that time, when it was 6.39%.
The Mortgage Bankers Association's Weekly Applications Survey, which covered the period ending Dec. 5, found the 30-year conforming FRM rate at 6.33%, up 1 basis point from the prior week.
The housing outlook going forward
"Looking ahead, with rates below 6.5% and housing supply on the rise, MBA expects affordability conditions to improve slightly in the coming months," Bob Broeksmit, the organization's president and CEO, said in a Thursday morning comment.
In a statement after the FOMC announcement, Mike Fratantoni, the MBA's chief economist noted the group's economic forecast is for mortgage rates to stay within a fairly narrow range over the next few years.
"This forecast becomes more likely as the Fed reaches the end of their cutting cycle next year," Fratantoni continued.
Mortgage rates have already fallen meaningfully in recent months, noted Keefe, Bruyette & Woods analyst Bose George in a post-FOMC meeting report.
His read-through for the mortgage industry is that rates remain "somewhat range-bound, and we don't expect a meaningful decline in the 30-year FRM even if the Fed keeps cutting.
"This backdrop suggests that while mortgage volumes and prepayments could remain somewhat elevated, they are unlikely to increase meaningfully unless rates fall by more than we forecast," said George.
Zillow's latest forecast is that mortgage rates are unlikely to move under 6% next year, Ng said.
"Still, even without drastic declines in borrowing costs, 2026 is a year for small wins," Ng continued. "Affordability is set to gradually improve as modest rises in home values means that incomes can catch up, opening up a wider pool of shoppers able to buy a home."
Rocket's Symoniak has a slightly more pessimistic view.
"Today's housing market is still defined by the lock-in effect," Symoniak said. "Homeowners who secured historically low rates four or five years ago are staying put, keeping inventory tight and amplifying the impact of every rate move."
Since the FOMC reduction was not a surprise, the markets took it in stride, said Melissa Cohn, regional vice president of William Raveis Mortgage, in a statement.
Whether mortgage rates climb or fall going forward will depend on those delayed economic indicators. "The future of bond yields and mortgage rates will be determined as new data on jobs and inflation get released," Cohn said.
