Understanding December Mortgage Rates and Market Factors

December mortgage rates can be a bit tricky to navigate, but understanding the market factors at play can help you make an informed decision.

Mortgage rates in December tend to be influenced by the Federal Reserve's monetary policy decisions, which can impact the overall economy and interest rates.

Low unemployment rates, which typically lead to higher wages and a stronger economy, can cause mortgage rates to rise, making it more expensive to borrow money.

As of December, the 30-year fixed mortgage rate was around 3.7%, but this can vary depending on the lender and other market conditions.

The holiday season can also bring a slowdown in mortgage applications, which may lead to more competitive rates for those who do apply.

A fresh viewpoint: Us Housing Market Mortgage Rates Surge

Mortgage rates can be affected by the Federal Reserve's monetary policy, but the impact is more direct on adjustable-rate mortgages than fixed-rate mortgages.

The Federal Reserve's policy can cause adjustable-rate mortgage interest rates to fluctuate with the broader economy.

Intriguing read: Adjusted Rate Mortgage vs Fixed Mortgage

A mortgage rate is essentially a fee for borrowing funds to purchase a home, expressed as a percentage of the total amount borrowed.

The amount you'll have to pay as a fee for borrowing funds is directly tied to the mortgage rate you're offered.

Mortgage rates can be a significant factor in determining the overall cost of homeownership.

Consider reading: Fed Funds Rate vs Mortgage Rates Chart

Mortgage interest rates are likely to remain steady in December, staying between 6.75% and 7%.

Experts predict that mortgage rates will go down a bit in 2025, with Fannie Mae forecasting rates to end the year at 6.20% and fall to 6.00% by the end of 2026.

The Mortgage Bankers Association's outlook is similar, with rates ending 2025 at 6.40% and then reaching 6.30% by the end of 2026.

Mortgage rates are expected to remain relatively stable in December, with the 30-year fixed-rate home loan staying between 6.75% and 7%.

The inflation rate has been within expectations, and the Federal Reserve has been steering the economy as planned, which has contributed to the steady rates.

In November, mortgage rates were fairly steady, with some minor volatility after the election.

Experts predict that mortgage rates will decrease slightly in 2025 and continue to ease next year, with Fannie Mae forecasting rates to end the year at 6.20% and fall to 6.00% by the end of 2026.

The Mortgage Bankers Association also expects rates to end 2025 at 6.40% and reach 6.30% by the end of 2026.

The current average mortgage interest rate for a standard 30-year fixed mortgage is 6.51%, while the average rate for a 15-year fixed mortgage is 5.97%.

A 30-year fixed rate mortgage typically has a lower monthly payment than a 15-year one, but usually comes with a higher interest rate.

The average rate on a 5/1 adjustable rate mortgage (ARM) is 5.49%, which is often lower than a fixed mortgage for the first five years.

However, with an ARM, you may end up paying more or less after the initial rate period ends, depending on your loan terms and how the rate follows the market.

For your interest: Mortgage Rates Today 7/1 Arm with 0 Points

Comparing mortgage rates is a crucial step in securing a good deal. Rates can vary significantly by lender, with some mortgage lenders being significantly more affordable than others.

If you don't want to do the work yourself, consider working with a mortgage broker who can gather offers from multiple lenders and help you compare loan options. A mortgage calculator is a useful tool to see how different rates can impact your monthly payment.

For example, on a $400,000 loan, a 6.70% rate results in a monthly payment of $2,581, while a 6.30% rate results in a monthly payment of $2,476 – a more than $100 difference.

Recommended read: Shop Mortgage Rates

Buying and refinancing your home can be a complex process, but understanding how mortgage rates affect it can make a big difference.

Your rate has a direct impact on how much house you can afford. Snagging a lower rate can enable you to borrow more money, boosting your homebuying power.

For example, if you can afford to spend $2,000 a month on your mortgage payment, with a rate of 7%, you could borrow around $300,000, but with a 4% rate, you could afford to borrow as much as $400,000.

If you own your home and pay a mortgage, you might want to see if you can save money by refinancing. This can lower your monthly payment if current rates are lower than your mortgage rate.

Refinancing costs money, so you'll want to make sure your monthly savings make it worthwhile.

On a similar theme: Mortgage Refinancing Activity Rises as Rates Drop.

Mortgage rates are influenced by multiple factors, some outside your control and others you can influence.

The current state of mortgage rates has a significant impact on home prices and inventory. High mortgage rates have kept home prices from rising too rapidly this year, with the median sales price for existing homes reaching $406,100 in November 2024, up 4% from a year ago.

The pace of home price increases is expected to slow down in the coming years, with the Mortgage Bankers Association predicting a 1.3% increase by the end of 2025 and another 1.3% in 2026. Fannie Mae also forecasts a 3.6% increase by the end of this year and a 1.7% increase in 2026.

Recommended read: 3 Year Arm Mortgage Rates

Multiple factors affect the interest rate you'll pay on a mortgage. Some are outside your control. Others you can influence. Mortgage rates are determined by factors outside your control, such as economic indicators and government policies.

The interest rate you'll pay on a mortgage is also influenced by factors within your control, like your credit score and loan term. A good credit score can give you better interest rates, while a longer loan term can increase your overall interest paid.

Some mortgage rates are fixed, while others are variable, tied to the prime rate or another benchmark. This can make a big difference in your monthly payments.

Home prices have been affected by current mortgage rates, with a 4% increase in the median sales price for existing homes in November 2024 to $406,100.

The pace of price increases may slow next year, with predictions of a 1.3% increase by the end of 2025 and another 1.3% in 2026.

Fannie Mae forecasts a 3.6% increase in home prices by the end of this year, followed by a 1.7% increase in 2026.

Homeowners who have been waiting for lower mortgage rates may be more willing to list their homes as rates go down, increasing inventory and helping to slow price increases.

Falling mortgage rates can put upward pressure on home prices, but lower rates may also lead to more homes being listed on the market.

For another approach, see: Lowers Mortgage Rates

Mortgage rates in December can be a bit of a mixed bag, but one thing is clear: lenders are offering a range of options to suit different budgets and financial situations.

The average 30-year mortgage rate in December is around 3.5%, which is relatively low compared to historical averages. This means that homeowners who lock in this rate can enjoy lower monthly payments and a more affordable mortgage.

For those who are willing to take on a bit more risk, adjustable-rate mortgages can offer even lower rates, sometimes as low as 2.5% in December. However, be aware that these rates can fluctuate over time, affecting your monthly payments.

In addition to the mortgage rate, lenders also charge various fees that can add up quickly. These fees can include origination fees, closing costs, and appraisals, which can range from 0.5% to 1% of the loan amount in December.

Related reading: Mortgage Rates 17 Month Low

Closing costs can be a significant chunk of change. Mortgage closing costs usually range anywhere from 2% to 6% of your total home loan amount.

The cost can vary depending on many factors, including your lender and how much you're borrowing. It's possible to get the seller or lender to pay a portion or all of these costs.

You'll want to factor these costs into your overall budget when considering purchasing a home.

Consider reading: Mortgage Fha Rates Closing Costs

If you're considering working with a mortgage lender, LendingTree has reviewed a wide range of options.

Alliant Credit Union, Ally Bank, and Alterra are just a few of the lenders that have been reviewed by LendingTree.

Some lenders have been reviewed multiple times, such as Bank of America, which has been reviewed multiple times by LendingTree.

LendingTree has also reviewed lenders like Better Mortgage, BMO Harris Bank, and Caliber Home Loans.

Churchill Mortgage, Fairway Independent Mortgage, and Flagstar Bank are among the many lenders that LendingTree has reviewed.

Other lenders that have been reviewed by LendingTree include Guaranteed Rate, Guild Mortgage, and Lower.

Mr. Cooper, Navy Federal Credit Union, and Penfed Credit Union are also among the lenders that have been reviewed by LendingTree.

Sebonic Financial, SoFi Bank, and Spring EQ have also been reviewed by LendingTree.

TD Bank, Truist, and Veterans First Mortgage are additional lenders that have been reviewed by LendingTree.

Veterans United, Wells Fargo, and Wintrust Mortgage are also lenders that have been reviewed by LendingTree.

Zillow Home Loans is one of the many lenders that have been reviewed by LendingTree.

Here are some of the lenders reviewed by LendingTree:

The Federal Reserve plays a significant role in shaping mortgage rates. Its monetary policy directly affects adjustable-rate mortgages, which have interest rates that fluctuate with the broader economy.

For adjustable-rate mortgages, the Fed's policy is the primary driver of interest rate changes. This means that when the Fed adjusts its monetary policy, adjustable-rate mortgage rates are likely to follow suit.

The Fed's policy has a more indirect impact on fixed-rate mortgages, which can move independently of the federal funds rate. In some cases, fixed-rate mortgage rates may even move in the opposite direction of the federal funds rate.

For your interest: 10 Year Adjustable Rate Mortgage Rates