U.S. mortgage rates rose this week to 6.72%, ending a three-week streak of declines, as the Federal Reserve’s updated projections hinted at a slower pace of rate cuts in 2025. The 30-year fixed-rate mortgage, which closely tracks the 10-year Treasury yield, remains within the 6%-7% range seen throughout 2023, Freddie Mac reported. The uptick coincides with the 10-year Treasury yield hitting a 6.5-month high, reflecting economic resilience and inflation concerns.
The Federal Reserve’s decision to cut its benchmark rate by 25 basis points this week contrasts with its September projections of four quarter-point cuts in 2025. The latest guidance, which now includes only two expected cuts, comes amid uncertainty surrounding policies from President-elect Donald Trump’s incoming administration. Economists caution that Trump’s fiscal and trade policies, including tariffs and tax cuts, could exacerbate inflationary pressures, complicating the Fed’s outlook.
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Market Overview
- U.S. 30-year fixed mortgage rates rose to 6.72%, ending three weeks of declines.
- The 10-year Treasury yield reached a 6.5-month high, influencing mortgage rates.
- Existing home sales surged in November, reflecting earlier rate declines.
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Key Points
- The Fed projected only two rate cuts in 2025, down from four in prior estimates.
- Uncertainty over Trump’s economic policies adds to inflationary risks.
- Freddie Mac expects mortgage rates to remain in the 6%-7% range in the near term.
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Looking Ahead
- Mortgage rates may continue rising as Treasury yields remain elevated.
- Trump’s trade and fiscal policies will shape housing affordability in 2025.
- Homebuyer sentiment will hinge on inflation trends and Fed policy adjustments.
- Despite the rise to 6.72%, mortgage rates remain within the 6%-7% range, offering stability for homebuyers compared to more volatile periods.
- The surge in existing home sales in November reflects strong demand, suggesting resilience in the housing market despite affordability challenges.
- The Federal Reserve’s slower pace of rate cuts signals confidence in the broader economy’s ability to withstand higher interest rates.
- Trump’s proposed tax cuts could boost disposable income, indirectly supporting housing demand and homebuyer sentiment.
- Elevated Treasury yields indicate economic resilience, which may sustain investor confidence and broader market stability.
- The uptick in mortgage rates to 6.72% adds pressure to housing affordability, potentially dampening demand and slowing home sales in 2024.
- Uncertainty over Trump’s fiscal and trade policies could exacerbate inflationary pressures, complicating the Federal Reserve’s ability to stabilize rates.
- Higher Treasury yields may keep mortgage rates elevated, deterring first-time buyers and reducing refinancing activity.
- The reduction in projected Fed rate cuts from four to two in 2025 signals a more cautious monetary policy outlook, limiting relief for borrowers.
- Persistently high mortgage rates could lead to a slowdown in construction activity, impacting housing supply and broader economic growth.
The rise in mortgage rates underscores the complex interplay between Federal Reserve policy, Treasury yields, and economic expectations. Despite recent declines, rates remain near historical highs, creating affordability challenges for homebuyers and impacting housing market dynamics.
As the U.S. navigates economic uncertainties under Trump’s incoming administration, housing market participants will closely watch the Fed’s actions and fiscal policies. Continued stability in mortgage rates will be critical to sustaining momentum in home sales and broader economic growth.
