Mortgage rates unchanged ahead of expected Fed rate cut

"The stable nature of mortgage rates in recent weeks is partially tied to the consistency in mortgage spreads. The spread between the 30-year mortgage rate and the 10-year Treasury rate is higher than its historic average of 1.60% to 1.80%, but at a current figure of 2.19%, it's much lower compared to where it was in late 2023 and late 2024. Mortgage spreads were the unsung superheroes of the housing sector this year, because we wouldn't have had mortgage rates near 6% without them improving,"

"Despite the ongoing friction between employment data and inflation data that could pull the economy in opposite directions, interest rate traders are confident that the Federal Reserve will lower benchmark rates on Dec. 10. The CME Group's FedWatch tool shows that 87% of traders are anticipating a cut of 25 bps, which would bring the federal funds rate to a range of 3.50% to 3.75%. It hasn't been that low since September 2025."

"Bright MLS chief economist Lisa Sturtevant said last week that she didn't expect much movement for mortgage rates even with a third straight Fed cut. We are entering the traditionally slowest period for the housing market. Monthly home sales are lowest in November, December and January. Listing activity slows down during the winter as prospective sellers set their sights on early spring, Sturtevant said in written commentary. We are in a wait-and-see' housing market as we head into 2026."

The recent stability in mortgage rates reflects steady mortgage spreads. The spread between the 30-year mortgage and the 10-year Treasury is about 2.19%, above the long-run 1.60–1.80% average but lower than in late 2023 and late 2024. Improved mortgage spreads helped keep mortgage rates near 6%. Traders see an 87% probability of a 25-basis-point Federal Reserve cut on Dec. 10, which would set the federal funds rate at 3.50%–3.75%. Forecasts suggest little mortgage-rate movement even with another cut. Housing activity typically slows in November–January, producing a wait-and-see market with many buyers and sellers sidelined. Federal Reserve dissent expanded in 2025.

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