Mortgage rates ticked up this week despite latest Fed cut

Mortgage rates rose this week in the run-up to the Federal Reserve’s latest interest rate cut.

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The average 30-year mortgage rate was 6.72% in the week through Wednesday, compared with 6.6% a week earlier, according to Freddie Mac data. The average 15-year mortgage rate was 5.92%, from 5.84%.

Much of Freddie Mac’s survey was conducted before the Federal Reserve trimmed benchmark interest rates by 25 basis points on Wednesday and signaled that it may only cut rates twice in the next year. The dimmer prospects for additional cuts in 2025 sent Treasury yields and mortgage rates higher.

As of Wednesday afternoon, the average 30-year mortgage rate was 7.13%, according to Mortgage News Daily.

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“This week, mortgage rates crept up to a similar average as this time in 2023,” said Sam Khater, Freddie Mac’s chief economist. “Homebuyers are slowly digesting these higher rates and are gradually willing to move forward with buying a home, resulting in additional purchase activity.”

Read more: Mortgage and refinance rates today, December 19, 2024: Rates increase after Fed meeting

The Fed doesn’t directly control mortgage rates. Rather, mortgage rates closely track the 10-year Treasury yield, as well as changes in expectations about future benchmark interest rate moves. Before Wednesday’s meeting, analysts expected the central bank would cut rates four times next year.

Read more: How the Federal Reserve rate decision affects mortgage rates

In a press conference on Wednesday, Fed Chairman Jerome Powell acknowledged the Fed’s impact on the housing market in recent years.

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“Housing activity is very low. And that’s partly — significantly because of our policy,” he said, adding that it’s a sign that the Fed’s monetary policy was working.

Housing economists largely expect mortgage rates to stay north of 6% next year, although many predict a gradual drift lower. High interest rates, coupled with near-record-high home prices, continue to make affordability challenging for many would-be buyers.

In one market bright spot, existing home sales improved in November, growing 4.5% from a month earlier to a seasonally adjusted rate of 4.15 million, according to the National Association of Realtors (NAR). Sales are up 6.1% compared to a year earlier.

“More buyers have entered the market as the economy continues to add jobs, housing inventory grows compared to a year ago, and consumers get used to a new normal of mortgage rates between 6% and 7%,” NAR chief economist Lawrence Yun said in a statement.

Claire Boston is a senior reporter for Yahoo Finance covering housing, mortgages, and home insurance.

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