Insights and Analysis: Mortgage and Real Estate Capital Markets Update with Jeff Rosato, SVP of Capital Markets at Nationwide Mortgage Bankers.
Key Takeaways: Bond Market Trends and Fed Outlook
Mortgage rates have stabilized recently but remain high compared to earlier this year, with the average 30-year fixed rate at 6.69%. The Federal Reserve is expected to decide whether to lower interest rates again next week, with inflation data coming out this week playing a big role in their decision.
I hope everyone had a great weekend! Here is this week’s update covering the major bond market indices, scheduled Federal Reserve meetings, upcoming market-moving economic data releases, and overall bond market trends.
“Expectations have changed throughout the year, however most economists still believe that the Fed will cut rates again in December. The futures markets are pricing in a 60% probability of .25 point cut at the Dec 18th meeting.”
Market Overview
Mortgage rates have shown signs of stabilization over the past two weeks after climbing sharply through late October and November. While the bond markets have seen some relief in recent weeks, mortgage rates remain at their highest levels since early August.
As of last Thursday, Freddie Mac’s average 30-year fixed rate was 6.69%, down 12 basis points from the prior week. This puts the maximum APR for 30-year fixed-rate loans at approximately 8.19% (6.69 + 1.50). Meanwhile, the 10-Year Treasury yield closed last week at 4.15%, down 3 basis points on the week.
Looking at Federal Reserve actions, expectations have shifted significantly throughout the year. At the start of 2024, predictions suggested the Fed would begin rate cuts before the summer, amounting to a total of 150 basis points in reductions by year-end. However, the first rate cut did not occur until September, with only 75 basis points reduced so far.
Most economists still anticipate another 0.25% rate cut at the December 18th Federal Reserve meeting, with futures markets pricing in a 60% probability. However, recent Fed commentary has adopted a cautious tone, emphasizing data dependence and leaving all options on the table. There remains a possibility the Fed will hold rates steady, but with inflation continuing its downward trajectory, the odds favor a small rate cut.
At the conclusion of next week’s meeting, the Fed will also release updated forecasts for key economic indicators and the federal funds rate, offering greater insight into their outlook for 2025 and beyond.
Economic Data Highlights
Last week, attention was on employment data. The November non-farm payrolls report showed 224,000 jobs added, slightly exceeding expectations of 215,000 and rebounding sharply from October’s weak numbers. This result highlights the continued resilience of the U.S. economy.
This week, the spotlight shifts to inflation data, with the Consumer Price Index (CPI) set to release on Wednesday and the Producer Price Index (PPI) on Thursday. These are the final critical economic reports before next week’s Federal Open Market Committee (FOMC) meeting and will heavily influence the Fed’s upcoming rate decision.
Beyond inflation data, it is a relatively quiet week, with no scheduled Fed speeches and limited other economic releases.
New Lock Volume Update
Last week was exceptionally strong for new lock volume, with 110 new locks totaling $56 million—an average of 22 locks per day. The trailing four-week daily lock average has risen to 22, driven by robust activity to close November and start December.
For November, total lock volume reached 362 locks totaling $175 million, a 3% increase compared to October. December is off to an even stronger start, with new lock volume already up over 40% compared to the same period in November.
Current Market Trends
As of this morning:
- MBS prices are down 5–10 basis points.
- The 10-Year Treasury yield has risen slightly to 4.18%.
Markets are expected to remain stable this week unless inflation data surprises to the upside.
As always, we’ll keep an eye on the market for any updates—check back next week for the newest insights!
