As prospective homebuyers step through a property alongside their real estate agent, the financial landscape around them is shifting. Just recently, the Federal Reserve announced its third interest rate cut for 2024. Paradoxically, this move didn’t bring a decrease in mortgage rates—instead, they climbed.
For the week ending December 19, the average rate for a 30-year fixed mortgage jumped to 6.72%, as reported by Freddie Mac in conjunction with the Federal Reserve. This was an uptick from 6.60% the previous week. In a more detailed daily view provided by Mortgage News Daily, the rate soared to 7.13% on Wednesday, up from Tuesday’s 6.92%, and nudged slightly to 7.14% on Thursday.
Taking a deeper dive into the Fed’s actions, their recent “dot plot” has unveiled a shift in expectations about future rate cuts, as noted by Melissa Cohn from William Raveis Mortgage. This projection tool, which the Fed uses to show where individual members think rates are heading, now suggests the benchmark rate could settle around 3.9% by the end of 2025, which suggests a target range of 3.75% to 4%. Currently, following the latest cut, the rate sits at 4.25% to 4.50%.
Initially, back in September, the Fed hinted at a full percentage point reduction spread over four quarter-point cuts slated for 2025. However, compounded by certain policy stances from former President Trump—like those on tariffs, immigration, and tax cuts, all potentially inflation-inducing—the bond market reacted with caution, Cohn observed.
Mortgage rates typically adjust with foresight into what the Fed might do at their forthcoming meetings, explains Jacob Channel from LendingTree. We saw this earlier in the year; as hints of the first interest rate cut since March 2020 loomed, mortgage rates started to dip during the summer and early fall. Consequently, he notes, changes in mortgage rates might not be so pronounced once the Fed’s decisions are officially made.
