This week was the last Fed meeting for the year. The Fed did as most expected and lowered rates by .25 point again. As is normal, it was the comments after the meeting that affected mortgage rates the most. For a change, we saw the bond market react positively to the Fed Chairman’s comments.
Chairman Powell talked about the BLS jobs report that comes out the first Friday of every month. It has been delayed the last two months due to the government shut down. He commented that the report has been overstated by about 60,000 jobs per month and he feels we have been losing about 20,000 jobs per month. That could help the jobs report we see next week (December’s report was delayed due to the shut down).
Another surprise in the Fed announcement was that they are going to be buying $40 billion per month in Treasury bills, starting today. That could mean the Treasury could offer less long term debt and that could help us.
It will be interesting to see what the Fed does in 2026. There were three Fed Governors that dissented. One wanted to see a .50 point cut in rates and two didn’t want any rate cut. The voting members of the Fed will change next year, those leaving tend to be more hawkish and less likely to cut rates. The members that are coming in are less hawkish than those leaving. We will also see a new Fed Chairman and so it is likely that the Fed will be more open to rate cuts.
The Fed puts out a “Dot Plot Chart” which gives an idea of what the Fed is expecting in rate cuts. The median for the current chart is one cut next year but in reality the chart was all over the place. So more than likely we will see at least two rate cuts, maybe more depending on what happens with employment and inflation.
So what now? Rates did improve a little bit but really just came back to where rates were at the beginning of the month. If next weeks jobs report is worse than expected, that could help rates. Inflation numbers could also help. But the good news is that rates are lower than they were a year ago! We are seeing more people look into refinancing to help lower their monthly payments. Let me know if I can help answer any of your questions!
Leslie Vanderwerf, NMLS ID#335509, CrossCountry Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
