This year started off with a bang when it came to mortgage rates. After the Fed meeting in December, we knew it was going to take some negative news in the economy to see interest rates come down much. Everyone was concerned about the jobs report for December and it came in with a bang. The expected report was a forecast of 160,000 new jobs, the actual number was 256,000 jobs added (seasonally adjusted). That number was so much higher than expected. Unemployment numbers dropped from 4.2% to 4.1%, the Fed is looking for unemployment to be around 4.3% or higher before considering further rate cuts. The bond market reacted quickly! Interest rates went up about a quarter percent.
This week we saw the inflation reports for December. The concern was that the numbers would be worse than expected (meaning higher inflation), this time we had a little relief. The December Consumer Price Index showed that overall inflation rose 0.4% for the month, which was 0.1% above the estimates of 0.3%. The Core rate which strips out food and energy prices increased by 0.2% which was below expectations of a 0.3% increase. The Fed really wants to see the Core rate at 2.0% and with December’s numbers, the year over year CPI moved from 3.3% to 3.2%. That helped mortgage rates and we gained back almost everything we lost on Friday.
So what about the rest of 2025? No one knows for sure – until it happens. We have seen interest rates climb again over the past couple of months and until we see some reports showing the economy is slowing down, we expect interest rates to be volatile.
What does that mean for people thinking about buying a home? It can be a great time to buy, sellers have been more flexible and you may get a better deal now than in a few months. Think about the long term benefits of owning a home. Fixed rate mortgages are more stable. The only part of the payment that will change is your property taxes and insurance. Remember as rates improve, you can always refinance.
No one knows for sure what will happen this year and I know we all expected rates to be much lower than they currently are. Before the December Fed meeting, most investors expected 4 rate drops in 2025. After the December Fed meeting, that changed to maybe 2 drops in 2025. Now we have heard from at least one Fed Governor and he thinks the Fed could lower rates multiple times in 2025 as long as inflation eases as he expects. So the reality is until we see reports showing issues with the economy, no one really expects rates to change very much. Remember that more than likely when rates do drop, more buyers will be looking and that could cause more multiple offers and higher home prices.
If you are thinking about buying a home, reach out to see what you might be able to qualify for and then you can make an educated decision on what is best for you.
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
