Rates Move Up On Fed Curveball

Officials at Freddie Mac reported Thursday that the 30-year fixed-rate mortgage rate averaged 6.72%, up from the week prior’s 6.60%.

A year ago at this time, the 30-year fixed-rate mortgage averaged 6.67%.

Fifteen-year rates also increased to 5.92% from 5.84%. A year ago at this time, they were at 5.95%.

“This week, mortgage rates crept up to a similar average as this time in 2023,” said Sam Khater, Freddie Mac’s Chief Economist. 

“For the most part, mortgage rates have moved between 6 and 7 percent over the last 12 months. Homebuyers are slowly digesting these higher rates and are gradually willing to move forward with buying a home, resulting in additional purchase activity.”

The Federal Open Market Committee voted to cut its key interest rate by another quarter-point in December, its third consecutive cut totaling 100 bps down from September.

But Federal Reserve Chairman Jerome Powell perplexed analysts with an unexpectedly cautious outlook.

“We are not on any preset course,” he said in remarks after the two-day meeting.

“We have been moving policy toward a more neutral setting in order to maintain the strength of the economy and the labor market while enabling further progress on inflation.  With today’s action, we have lowered our policy rate by a full percentage point from its peak, and our policy stance is now significantly less restrictive.  We can therefore be more cautious as we consider further adjustments to our policy rate.”

The FOMC’s Summary of Economic Projections now predicts two rate cuts in 2025. Analysts expected three.

Stocks slumped after the news broke.