The Fed cut its policy rate by 0.25% today and mortgage rates moved lower after the announcement. That said, those two developments are not related. In fact, there was no movement in the bonds that underlie mortgage rates when the rate cut was announced. Instead, the market (and rates) moved in response to Fed Chair Powell's press conference. While there is a mistaken belief that such press conferences "always" result in upward pressure on rates, today shows they can go both ways. Key comments that may have helped: Powell: Job gains could have been overstated in recent months Powell: Growing evidence that inflation is coming down Powell: Rates are now in a high range of neutral The reference to "neutral" means the Fed Funds Rate is near the levels that should neither help nor hurt the economy. Being in the higher end of that range means there could be room for another rate cut or two in 2026. This possibility was already reflected in the rate forecasts that came out with today's announcement, but the market appreciated hearing it from Powell. Up until Powell's press conference, mortgage rates had been little changed from yesterday. Afterward, most lenders made mid-day changes resulting in the lowest rates of the week.
Seasonally adjusted mortgage application activity rose 4.8% last week, according to MBA’s Weekly Mortgage Applications Survey for the week ending December 5. Unadjusted applications jumped 49% from the prior week, reflecting a rebound following the Thanksgiving-related slowdown. The Refinance Index surged 14% from the previous week and remains 88% higher than the same week one year ago—another strong year-over-year showing as borrowers respond to modest rate improvement, particularly in FHA products. Purchase activity was softer on a seasonally adjusted basis, slipping 2% from the prior week. Unadjusted purchase applications increased 32% week-over-week due to the holiday comparison and are running 19% above last year’s pace, supported by gradually improving affordability and inventory conditions. “Compared to the prior week’s data, which included an adjustment for the Thanksgiving holiday, mortgage application activity increased last week, driven by an uptick in refinance applications,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Conventional refinance applications were up almost 8 percent and government refinances were up 24 percent as the FHA rate dipped to its lowest level since September 2024. Conventional purchase applications were down for the week, but there was a 5 percent increase in FHA purchase applications as prospective homebuyers continue to seek lower downpayment loans. Overall purchase applications continued to run ahead of 2024’s pace as broader housing inventory and affordability conditions improve gradually.”
Available indicators suggest that economic activity has been expanding at a moderate pace. Job gains have slowed this year, and the unemployment rate has edged up but remained low through August; more September. More recent indicators are consistent with these developments. Inflation has moved up since earlier in the year and remains somewhat elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook remains elevated. The Committee is attentive to the risks to both sides of its dual mandate and judges that downside risks to employment rose in recent months. In support of its goals and in light of the shift in the balance of risks, the Committee decided to lower the target range for the federal funds rate by 1/4 percentage point to 3-3/4 3-1/2 to 4 3‑3/4 percent. In considering the extent and timing of additional adjustments to the target range for the the federal funds rate, the the Committee will carefully assess incoming data, the the evolving outlook, and the the balance of of risks. The Committee decided to conclude the reduction of its aggregate securities holdings on December 1. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective. In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments. The Committee judges that reserve balances have declined to ample levels and will initiate purchases of shorter-term Treasury securities as needed to maintain an ample supply of reserves on an ongoing basis.
Somewhere, in a parallel universe, Mariah Carey is walking around some supermarket, sick of listening to me sing Christmas carols. This is, of course, a humorous assumption, but what isn’t so humorous is the discussion begun by the Trump Administration about assumable mortgages, arguably the bane of MBS investors. Locked-in mortgage rates and frozen inventory have pushed an old idea back into the spotlight: the assumable mortgage, a feature long limited to FHA and VA loans but now debated as a potential fix for an affordability crisis that rate cuts alone cannot solve. As millions of ultra-low-rate mortgages sit trapped under American homes, policymakers, lenders, and consumers are wrestling with big questions about equity, market distortion, and what happens when formal financing channels no longer meet the needs of buyers and sellers. From the legal gray zones of “subject to” deals to international models like portable mortgages, pressure is building for bold solutions that could reshape everything from MBS markets to household mobility. The debate over assumability is really a debate about whether the housing system can adapt before consumers invent their own workarounds. Click to read the full deep dive. (Today’s podcast can be found here and this week’s are sponsored by Lenders One. Lenders One is dedicated to helping independent mortgage bankers, banks and credit unions reduce costs, improve profitability, and operate competitively in the mortgage industry and within their communities. Hear an interview with Texans for Reasonable Solutions’ Nicole Nosek on how housing reform hinges on pairing pro-supply, market-friendly policy with strategies that defuse local resistance, protect affordability for lower- and middle-income families. Robbie says you don’t want to miss this one.)
Bonds were modestly weaker overnight, but have moved back into positive territory after this morning's Employment Cost Index and NYSE. This means 10yr yields are at the bleeding edge of the 3-month range heading into this afternoon's Fed announcement.
The rate cut is about as close to a foregone conclusion as normal, so the focus remains squarely on the dot plot (and the press conference, to a lesser extent). The last dot plot showed one more cut in 2025 and one additional cut in 2026, but 2026's dots are much more dispersed.
With some of the more hawkish speeches recently, the risk is that some of the more central dots migrate up from 3.375 to 3.625--effectively suggesting the Fed is done cutting until further notice. We suspect some of the bond market weakness of the past 2 weeks is trading that fear, but there could be more weakness if it's confirmed. On the other hand, if 2026 retains the single rate cut, it should be rate-friendly.
Watching Rates
Check our some recent articles and posts about current rates.
The Fed cut its policy rate by 0.25% today and mortgage rates moved lower after the announcement. That said, those two developments are not related. In fact, there was no movement in the bonds that underlie mortgage rates when the rate cut was announced. Instead, the market (and rates) moved in response to Fed Chair Powell's press conference. While there is a mistaken belief that such press conferences "always" result in upward pressure on rates, today shows they can go both ways. Key comments that may have helped: Powell: Job gains could have been overstated in recent months Powell: Growing evidence that inflation is coming down Powell: Rates are now in a high range of neutral The reference to "neutral" means the Fed Funds Rate is near the levels that should neither help nor hurt the economy. Being in the higher end of that range means there could be room for another rate cut or two in 2026. This possibility was already reflected in the rate forecasts that came out with today's announcement, but the market appreciated hearing it from Powell. Up until Powell's press conference, mortgage rates had been little changed from yesterday. Afterward, most lenders made mid-day changes resulting in the lowest rates of the week.
Mortgage rates were surprisingly steady on Tuesday with most lenders roughly in line with Monday's levels. Why surprising? Because the bond market was noticeably weaker and bonds dictate day to day mortgage rate movement. In Tuesday's case, we can actually reconcile the steadiness with the timing of bond market movement. Specifically, bonds didn't lose ground until after the 10am release of the Job Openings data from the Bureau of Labor Statistics. Most mortgage lenders consider bond market levels before 10am when setting rates for the day. The implication is that if bonds are at the same levels tomorrow morning, the average lender would set rates higher. Tomorrow afternoon brings another potential source of volatility in the form of the latest Fed announcement. The most important thing to understand about tomorrow's probably Fed rate cut is that it is NOT a mortgage rate cut. In fact, mortgage rates have been more likely to move higher following recent Fed cuts. Even then, the cut itself is not the news the market is waiting for. Rather, traders are interested to see each Fed member's rate outlook via the quarterly release of the Fed's economic projections. In addition, every Fed meeting includes a press conference with the Fed Chair and bonds have often made the biggest moves in response. Bottom line: the rate cut means nothing for mortgage rates. Volatility will come from the 2pm ET dot plot (the chart that shows each Fed members' rate outlook) and the 2:30pm press conference.
Both stocks and bonds lost ground on Monday. This pushed mortgage rates up near their highest levels in just over 3 months (because mortgages are based on bond prices). To put the 3-month highs in perspective, today's rates are right in line with those seen 2 weeks ago. [thirtyyearmortgagerates] When we see a larger-than-average shift in rates, it's often attributable to an obvious catalyst. These can be things like economic reports, comments from the Fed, or geopolitical developments. In today's case, there are no obvious scapegoats. That said, given the proximity of the next Fed announcement, "pre-Fed jitters" will likely be a popular guess. Ultimately, between Thanksgiving and New Years, we're simply more likely to see random volatility without a clear root cause. Clear connections will be more likely over the next 2 days due to Tuesday's economic data and Wednesday's Fed announcement.
Average mortgage rates drifted slightly higher to end the week, though they remained under the levels seen on Monday and Tuesday. Even then, none of this week's movement was especially abrupt. That's interesting considering there was a decent amount of economic data throughout the week. It could be that the rate market is simply waiting for the heavier hitting events on the horizon. Next Tuesday's Job Openings data is on the watch list. It will be the first major October employment data from the Bureau of Labor Statistics (the same agency that publishes the big jobs report) since the end of the government shutdown. That's especially notable in this case because we won't ever get a full jobs report for October, and the portion that remains won't come out until the following week. Then on Wednesday, the The Fed will announce its rate decision. Markets are fairly convinced the Fed will cut rates, but the confidence isn't as iron-clad as normal. Additional surprises could arrive with the Fed's dot plot (updated rate forecasts from each Fed members) as well as Fed Chair Powell's press conference. As always, keep in mind that a Fed rate cut has no bearing on longer-term rates like mortgages. It's actually been more common to see mortgage rates rise following Fed rate cuts.
