Economists warn that concerns about inflation, the labor market, and the overall health of the U.S. economy could push mortgage rates higher in the coming weeks and months.
Slower Listings and Pending Sales
New home listings and pending sales have slowed, reflecting a seasonal slowdown in the housing market and a softening of both supply and demand. Mortgage rates have remained relatively steady following the Federal Reserve’s widely anticipated short-term rate cut on December 10.
As 2025 draws to a close, the economy continues to send mixed signals—especially regarding the labor market. Many buyers and sellers are taking a cautious “wait-and-see” approach, mirroring the Fed’s own measured strategy for monetary policy in the months ahead. This week’s economic data suggests that the usual seasonal slowdown is compounded by broader uncertainty, causing both buyers and sellers to hold back.
Mortgage Rates Hold Steady After Fed Decision
For those actively shopping for homes, mortgage rates remain in a narrow range. Freddie Mac reported that the 30-year fixed-rate averaged 6.22% as of December 11, slightly up from 6.19% a week earlier. Mortgage News Daily noted a slight decline in rates following the Fed’s December 10 rate cut.
Looking ahead, Lisa Sturtevant, chief economist at Bright MLS, cautions that rates could rise modestly in the final weeks of 2025 as investors react to the Fed’s mixed signals. “Concerns about inflation rebounding in 2026 could push mortgage rates higher in the coming weeks or months,” she said.
Anthony Smith, senior economist at Realtor.com, added that if rates remain around current levels in 2026, affordability should improve slightly. “While this won’t provide the dramatic relief some buyers hope for, rates are expected to remain low enough to offset modest home price growth,” he said.
Refinance Applications Tick Up
Although pending sales have slowed, mortgage applications increased this week, led by a 14% rise in refinance applications (seasonally adjusted) for the week ending December 5, according to the Mortgage Bankers Association (MBA). Conventional purchase applications declined slightly, while FHA purchase applications rose 5%, as buyers continue to seek lower downpayment options. Joel Kan, MBA’s vice president and deputy chief economist, noted, “Prospective homebuyers are still pursuing more affordable financing through FHA loans.”
Labor Market Shows Mixed Signals
The labor market remains uncertain, partly due to delays in key economic reports caused by the federal government shutdown earlier this fall. Initial jobless claims rose by 44,000 to 236,000 for the week ending December 6—the largest weekly increase since March 2020—though claims had been at their lowest level in over three years the prior week.
This uncertainty, combined with questions about the lasting impact of tariffs on inflation, prompted the Fed to indicate it may pause additional short-term rate cuts in early 2026. The central bank also signaled it wants to assess the effects of the three consecutive rate cuts already implemented before making further policy changes.