Mortgage rates climbed again after a short dip, sparked by the Federal Reserve’s plan to slow future interest rate cuts.
Key Facts:
– The 30-year fixed-rate mortgage rose to 6.85% on Dec. 25, the highest since mid-July.
– Rates reversed course after hitting 6.6% earlier this month.
– The Fed signaled that rate reductions may slow in 2025.
– Ten-year Treasury yields also moved higher after the Fed’s announcement.
– Monthly mortgage payments have risen from \$1,206 in 2021 to \$2,086 in 2023.
The Rest of The Story:
After enjoying a brief window of lower rates in early December, homebuyers are once again seeing mortgage costs inch upward for two straight weeks.
Fannie Mae projects these elevated rates to linger beyond next year, which could challenge housing affordability and buyer sentiment.
Despite the climb, some experts say buyers remain in the market.
Signs of improved wages and growing inventory might help, but the combination of higher prices and interest rates continues to test many prospective homeowners.
U.S. 10-Year Treasury Bond Yield
From 3.62% to 4.62% since the Fed started the latest rate-cutting (monetary policy easing) cycle in September. The U.S. 30-year mortgage rate has moved from 6.5% to 7.3%. How unusual is this price action? pic.twitter.com/uJ2hZGAo2J
— Lawrence McDonald (@Convertbond) December 28, 2024
Commentary:
Many observers point to excessive government spending as the main force behind inflation, which in turn pushed the Fed to raise rates.
With the new Trump administration on the horizon, there is hope for stricter budget discipline that could bring inflation down.
If spending is curbed, interest rates could fall, giving the real estate market fresh momentum.
Lower borrowing costs would likely spur a construction boom, creating jobs and giving homebuyers some relief.
The Bottom Line:
Mortgage rates remain elevated, but a shift in fiscal priorities could ease inflation and pull rates lower.
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Buyers and builders alike stand to benefit if spending reforms materialize and the housing market rebounds.