Just when it seemed like we were experiencing a period of stability — the quiet before the storm of the Fed meeting — mortgage rates have once again increased.
The average interest rate on a 30-year fixed-rate mortgage has risen to 6.15% APR, based on rates provided by Zillow to BW. This represents a 15 basis point increase from yesterday and a 14 basis point increase from a week ago. (Refer to our chart below for more details.) A basis point is equivalent to one one-hundredth of a percentage point.
The Federal Reserve is set to hold its final meeting of 2025 next week, where we will finally get clarity on the ongoing speculation. Typically, as we approach a meeting, the markets have already decided whether the Fed will raise, lower, or maintain the federal funds rate. However, this time around, there is more uncertainty than usual — further details are discussed below the graph.
This uncertainty has led mortgage lenders, like all of us, to try and determine the current situation, resulting in less consensus than usual. In times of rapidly changing mortgage rates, it is crucial to compare offers from multiple lenders. Even though you provide the same information to each lender, the rate quotes may vary significantly.
Research conducted by Freddie Mac has revealed that during periods of relatively stable mortgage rates, comparing quotes from two lenders could result in an average rate reduction of 10 basis points, or one-tenth of a percentage point. In times of rapidly changing rates, this average reduction increases to 20 basis points. While a fifth of a percentage point may not seem significant, Freddie Mac estimates that comparing quotes from just two lenders could save borrowers up to $600 annually. Shopping around with four or more lenders could potentially lead to annual savings exceeding $1,200.
Although the economy operates round the clock, markets are closed on weekends. Therefore, the rates you observe on Friday are unlikely to fluctuate significantly until Monday.
Average mortgage rates, last 30 days
Watch: How will December’s Fed meeting affect mortgage rates?
📉 When will mortgage rates drop?
Mortgage rates are constantly changing, as they are heavily influenced by reactions to new inflation reports, job figures, Fed meetings, global news, and various other factors. Even minor fluctuations in the bond market can impact mortgage rates.
Like many others, the Nerds are eagerly awaiting next week, particularly December 10, when the Federal Reserve will announce their decision regarding whether to adjust short-term interest rates or maintain the status quo.
Due to the recent government shutdown impacting federal data collection, central bankers are working with limited information compared to normal circumstances. This lack of clarity has made their upcoming decision less straightforward, not only for them but also for observers. Additionally, the Fed governors have been divided in their opinions, with some advocating for a rate cut and others urging caution in their public statements.
The underwhelming November job data released earlier this week by ADP, a payroll services company, strengthened the case for a rate cut. Subsequently, this morning, the Department of Commerce published inflation figures for September (albeit three months old but still valuable). These numbers included the latest personal consumption expenditures price index (PCE), which serves as the Fed’s preferred inflation gauge. The PCE remained stable compared to the previous month, meeting market expectations.
This brings us back to where we started the week: uncertain about the Federal Reserve’s next move. The two factions within the Fed can still present compelling arguments. Those concerned about the deteriorating job market could push for a rate cut, while those already wary of high inflation levels might argue that there has been no improvement. Market sentiment is leaning heavily towards a 25-basis-point cut, although there are still skeptics who believe the Fed will maintain the current rates.
The central bankers will receive one final piece of government data before making their decision on Wednesday. On Tuesday morning, coinciding with the Fed meeting, the Bureau of Labor Statistics will release Job Openings and Labor Turnover (JOLTS) data for October. If the JOLTS report indicates a weaker labor market, a 25-basis-point rate cut will likely shift from probable to almost certain.
🔁 Should I refinance?
Refinancing might be a viable option if today’s rates are at least 0.5 to 0.75 percentage points lower than your current rate (and if you plan to stay in your home long enough to recoup closing costs).
Given the current rate environment, it may be worth considering a refinance if your existing rate is around 6.65% or higher.
Additionally, consider your objectives: Do you aim to reduce your monthly payment, shorten your loan duration, or convert home equity into cash? For instance, you might be more inclined to accept a higher rate for a cash-out refinance as opposed to a rate-and-term refinance, as long as the overall costs are lower than maintaining your original mortgage and adding a HELOC or home equity loan.
If you are seeking a lower rate, utilize BW’s refinance calculator to estimate potential savings and understand the break-even point for refinancing costs.
There is no universal “perfect” time to commence shopping — what’s essential is whether you can comfortably manage a mortgage at the current rates.
If the answer is affirmative, don’t fret too much about potentially missing out on lower rates in the future; you can always refinance later. Focus on getting preapproved, comparing lender offers, and determining a monthly payment that aligns with your budget.
BW’s affordability calculator can assist you in estimating your potential monthly payment. If purchasing a new home isn’t currently feasible, there are steps you can take to enhance your buyer profile. Use this time to reduce existing debts and build up your down payment savings. Not only will this increase your cash flow for future mortgage payments, but it can also secure a better interest rate when you’re ready to buy.
🔒 Should I lock my rate?
If you have received a quote that satisfies you, it’s advisable to consider locking in your mortgage rate, particularly if your lender offers a float-down option. A float-down feature allows you to take advantage of a better rate if the market shifts in your favor during the lock period.
Rate locks shield you from rate hikes while your loan is being processed, and given the volatile nature of the market, this peace of mind can be invaluable.
🤓 Nerdy Reminder: Rates can fluctuate daily, even hourly. If you are content with your current offer, feel free to commit.
🧐 Why is the rate I saw online different from the quote I received?
The advertised rate is typically a sample rate — often for a borrower with excellent credit, making a substantial down payment, and paying for mortgage points. This may not align with every buyer’s specific circumstances.
In addition to external market factors beyond your control, the customized quote you receive is influenced by factors such as: