Inflation is showing signs of easing—so much so that Federal Reserve Chairman Jerome Powell said he’s willing to consider a more moderate rate hike at the central bank’s December meeting.
That news pushed mortgage rates down a bit, but the dip could be temporary. “If inflation strengthens unexpectedly, 10-year Treasury yields could move higher, with mortgage rates following suit,” says Odeta Kushi, deputy chief economist at First American Financial Corporation.
Here’s what mortgage experts have to say about December’s 30-year fixed rate trends and what you can do.
Experts Predict: What Will Happen With Mortgage Rates In December?
George Ratiu, senior economist and manager of economic research for Realtor.com
“I see a moderation for rates in December. We’re probably going to see between 6% and 6.5%—somewhere in that range” for the 30-year fixed-rate mortgage.
Nicole Rueth, producing branch manager with the Rueth Team Powered by OneTrust Home Loans
“I believe rates will be volatile in a narrow range. Light holiday and winter trading will make a bigger impact on smaller news; however, I believe the Fed has made it clear that we need to hit the Fed target of 5% or, even more recently, 7% before inflation will subside.”
Odeta Kushi, deputy chief economist at First American
“If incoming inflation data surprises to the upside, or the FOMC (Federal Open Market Committee) takes a more hawkish tone than markets anticipate in the December meeting, mortgage rates may move up further.”
What Is Affecting Mortgage Rates Right Now?
Mortgage rates are dropping slightly as inflation shows signs of easing and the Federal Reserve is considering how to move forward.
Throughout 2022, the Fed has increased its benchmark interest rate six times in an effort to lower inflation. The most recent Consumer Price Index showed that prices are increasing at a slower pace than expected. This could indicate the Fed’s policies are working, says George Ratiu, senior economist and manager of economic research for Realtor.com.
In light of the positive news, “it may make sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down,” Fed Chairman Jerome Powell said during a recent speech at the Brookings Institution. “The time for moderating the pace of rate increases may come as soon as the December meeting.”
While Powell indicated the central bank would continue raising the federal funds rate, the Fed’s softened stance is “clearly having an impact on mortgage rates,” Ratiu says. For instance, Freddie Mac’s survey showed the 30-year fixed mortgage rate at 6.49% on Dec. 1.
However, inflation is still elevated at 7.7% year-over-year. “Ultimately, it’s likely that mortgage rates will continue to drift higher in the months to come, unless the Fed can get inflation under control,” Kushi says.
Experts’ Advice for Homebuyers and Sellers
The slight drop in mortgage rates is welcome news to homebuyers. Here’s what mortgage experts say you should do right now.
When Sellers Should Put Off Listing Their Homes
Home purchases are down 41% from one year ago, according to the Mortgage Bankers Association. The drop in demand is causing sellers to lower home prices or pull their listings off the market. If you’re planning to do the same with your listing, you’ll likely “get more for it in the spring when there is some hope that rates will either come down or settle in,” says Nicole Rueth, producing branch manager with the Rueth Team Powered by OneTrust Home Loans.
When Buyers Should Put Off the Home Purchase
If a new mortgage payment would stretch your budget, you might want to put off your home purchase for a few months. “Sitting on the sidelines may allow a potential buyer to continue to pay down their debt, build up their credit, and save for the down payment and closing costs,” Kushi says.
However, some are in a good position to make an offer on a home. Year-over-year incomes are rising for private employees—putting them in a stronger position to deal with elevated home prices and interest rates. Additionally, the inventory of homes for sale continues to increase. And with fewer competitors for homes, sellers “will be willing to negotiate on price, concessions, and inspection items,” Rueth predicts.
Pay attention to your closing costs because you’ll pay them when you buy the home and when you refinance. One way to give yourself extra flexibility is to avoid closing costs by accepting a higher interest rate in exchange for lender credits.
Shop With Multiple Mortgage Lenders
With borrowing costs at a two-decade high, “it’s more important than ever to shop around for a mortgage rate,” Kushi says.
A study by the Consumer Financial Protection Bureau found that interest rates can vary by 0.5% or more between two similarly qualified borrowers. If you buy a home for $200,000 and put down 20%, for example, you’d save $53 a month with a 6.5% interest rate compared to 7%. And over the life of the loan, you’d save more than $19,000.
When you’re shopping around, ask at least three mortgage lenders for a loan estimate. Based on factors such as your credit score, debt-to-income ratio, and down payment, the lender can estimate your interest rate, monthly mortgage payment, and closing costs.
Use these estimates to compare lenders and choose the one that can save you money. Enter the loan amount, rate, fees, and term for each offer into a mortgage calculator—or use this home loan comparison tool below. You’ll be able to see a true side-by-side comparison of your potential monthly mortgage payment and how closing costs, lender fees, and interest rates play out over time with each loan offer.
Home loan comparison calculator
Compare your payment options side-by-side to see which is right for you and your financial situation.
Find the mortgage that’s best for you by comparing the cost of multiple loans over time.