December Mortgage Outlook: Rates Could Move Up

If November’s fickle rates are a sign of what’s to come, mortgage rates will likely rise in December.

Analysts went into this month with a growing sense that the Federal Reserve would vote to lower the federal funds rate at its Dec. 9-10 meeting. However, any cuts to mortgage rates related to this month’s meeting will be relegated to the first week or so of December.

After the meeting, lenders will set mortgage rate expectations for the rest of the month based on market forecasts moving into 2026.

Sure, it’s possible that this meeting will reveal that all voting members of the Fed’s monetary policy committee are mostly on the same page moving forward. But it’s way more likely that divisions that have emerged in recent weeks will persist, and uncertainty around the Fed’s next move could send rates up.

Financial markets are always reacting to predictions about future shifts in monetary policy. While Fed Chair Jerome Powell has cautioned that no decisions are set in stone, central bankers like to telegraph their interpretations of economic conditions well ahead of scheduled meetings.

When there’s a sense of uniformity and consensus in these statements, lenders can set mortgage rate expectations with confidence. When central bankers appear to disagree, rates can move all over the place, jumping up or down depending on who happens to be speaking that day.

We saw this happen in November. For example, rates that Zillow provided to NerdWallet show that on Nov. 20, the average 30-year mortgage rate rose 13 basis points from the previous day (from 6.15% to 6.28% APR) after Fed Governor Michael Barr and Cleveland Fed President Beth Hammack both voiced concerns about inflation. The next day, New York Fed President John C. Williams told audiences at a conference that he saw room for another rate cut in the near future, sending the average 30-year rate tumbling 24 basis points to 6.04% APR. A basis point is one one-hundredth of a percentage point, so 24 basis points is 0.24 percentage points.

The minutes from the October Federal Reserve meeting also showed that at least two distinct camps had formed. Central bankers are generally in agreement that the labor market is lagging and that inflation has been higher than the Fed’s target for years. Where these groups disagree is on which factor to prioritize.

If you’re keeping an eye on the news for signs of what mortgage rates are going to do over the next few weeks, you’ll probably be seeing reports about what various members of the Federal Reserve are saying. The important thing to remember is that even though individual remarks can sway rates on a day-to-day basis, no one member speaks for the whole group. These days, rates can shift the minute a different central banker opens their mouth.

Adding to the overall lack of clarity this month, the release dates for two key reports keep getting delayed.

The first is the third-quarter GDP report, an indicator of the economy’s health. The second is November’s Personal Consumption and Expenditures Index, which provides the preferred measure of inflation among many economists, including the Federal Reserve.

If central bankers don’t have clear insight into the direction of inflation, members of the Fed who were opposed to cutting rates at the past two meetings are likely to become a lot more vocal. This could raise doubts among lenders that any further cuts are coming in early 2026, pushing up mortgage rates.

Both the Mortgage Bankers Association (MBA) and Fannie Mae are predicting that the 30-year mortgage rate will average 6.3% for the last three months of this year. Mortgage rates averaged 6.24% from October to the end of November, meaning that for the predicted average to be accurate, rates would need to rise in December.