Mortgage rates are in a holding pattern, according to recent data. But is this just the eye of the storm? Or is it a genuine plateau? Let’s dive into the numbers and see if we can find some answers.
The Stasis: A Basis Point Here, a Basis Point There
Optimal Blue's data, reviewed on November 21st, shows the average interest rate for a 30-year, fixed-rate conforming mortgage at 6.236%. That’s a minuscule drop from the previous day and about 2 basis points lower than a week prior. Jumbo loans are at 6.514%, FHA at 6.129%, VA at 5.896%, and USDA at 6.008%.
These small fluctuations might seem insignificant. But remember, in the world of finance, even fractions of a percentage point can translate to thousands of dollars over the life of a loan. We're talking real money. Is this stability a sign of things to come, or simply a pause before the next surge?
The article notes that many observers were hoping for rates to soften when the Federal Reserve started cutting the federal funds rate in September 2024. This didn’t pan out as expected. There was a brief dip, but rates quickly rebounded, topping 7% by January 2025. This is a far cry from the historic low of 2.65% in January 2021. (Those were the days, huh?)
The Trump Factor and Fed Actions
The article points to policies of President Trump, such as tariffs and deportations, as potential factors that could tighten the labor market and reignite inflation. Against this backdrop, homebuyers have been stuck with high mortgage rates. However, there was some relief in late August and early September 2025, leading up to the Fed’s September meeting, where they cut the federal funds rate by a quarter percentage point (the first cut of 2025). A second cut followed in October, leaving the door open for another reduction in December.
But here's where my analysis suggests a bit of caution. The Fed's actions are certainly influential, but they don't operate in a vacuum. Global economic conditions, inflation expectations, and even geopolitical events can all play a role. The article also mentions the Fed's balance sheet, noting that slimming it down puts upward pressure on mortgage rates. In other words, the Fed's actions are a complex balancing act, and their impact on mortgage rates isn't always straightforward.
What if the Fed decides to hold steady in December? How will the market react? And what if inflation proves more stubborn than anticipated? These are the questions that keep mortgage lenders (and potential homebuyers) up at night.
Strategies and Historical Context
The article offers some standard advice for getting the best mortgage rate: ensure excellent credit (a score of 740 or higher is considered top tier, according to Blue Water Mortgage) and keep your debt-to-income (DTI) ratio low (ideally 36% or below). Getting prequalified with multiple lenders is also crucial.
It also provides some historical context. Rates around 7% aren't abnormally high when looking at the long view. In the 1990s, 7% was more or less the norm. In the 1970s and 80s, rates were much higher, even exceeding 18% in 1981. But, this historical context is scant comfort for homeowners locked in with low pandemic-era rates (the “golden handcuffs”).
And this is the part of the report that I find genuinely puzzling. If historical rates are typically around 7%, why is there so much angst about current rates hovering around 6%? Is it simply a matter of recency bias, where people are overly influenced by recent events? Or is there something more fundamental at play?
The Assumable Mortgage Debate
The article touches on a HousingWire op-ed advocating for Fannie and Freddie to make mortgages assumable retroactively. The idea is to alleviate the lock-in effect caused by low interest rates. However, this proposal is fraught with challenges. Sellers might find it hard to sell the house for a higher price, and buyers might need a sizable second-lien mortgage at a higher interest rate. Moreover, it could cost MBS investors hundreds of billions and potentially make GSE IPOs unviable.
This is a classic case of good intentions gone awry. While the idea of assumable mortgages sounds appealing, the practical implications are complex and potentially damaging. The article suggests alternative solutions, such as portable mortgages or spurring the development of the second lien market.
Waiting for the Real Shift
The key takeaway? Mortgage rates are in a holding pattern, but the underlying forces that drive them are anything but stable. The Fed's actions, inflation expectations, and global economic conditions all play a role. It's a complex puzzle with no easy answers.
