Updated on December 31, 2024 10:15:55 AM EST

There is nothing of importance scheduled today that is expected to influence mortgage rates. With little to address today, let's take a moment to look back at this past year's activity. There are many variables that affect mortgage rates besides economic data, such as regional pricing, lender pipeline management and secondary marketing commitments to name just a few. Credit score, debt ratios and loan to value (downpayment or equity in the property) also contribute to an individual borrower's interest rate. Therefore, we can only speak of generalizations and average pricing in this recap. It is also worth noting that December 31st of last year fell on a Sunday, making the first trading day of this year January 2nd.

First, let's start with the benchmark 10-year Treasure Note yield, which is the easiest indicator for the public to follow when tracking mortgage rate direction. We refer to this as the “bond market” in our daily reports. It opened the year at 3.93% before peaking at 4.69% April 25th. A bumpy downward trend in yields started from there (bond prices move higher to push yields lower), eventually bottoming out at 3.61% on September 16th. It fell below and then broke above the 4.00% threshold four times throughout the year when using closing yields. Mortgage rates tend to track bond yields, so when the 10-year yield moves higher, mortgage rates often follow suit.

We will use FreddieMac's 30-year Fixed Rate Mortgage weekly chart for the second part of our summary. The first week of the year ended with rates averaging 6.62%, then stayed on the same path as the 10-year yield. They appear to have peaked at 7.22% the week of May 2nd and reached their lowest point of 6.08% the last week of September. Based on last week's update (most recent available), it looks like 30-year Fixed rates will end the year approximately .25% higher from where they started it back on January 2nd.

Going forward, the bond market has a couple of hurdles that could prevent mortgage rates from moving significantly lower next year. One is the government's budget deficit, which is the difference between what it spends and the amount of income taken in- mostly from tax payments. The government sells Treasury debt to cover the difference between the two. There is fear that the deficit may widen next year, causing the need for more debt to be sold. As more supply hits the market, demand may not keep up. This would translate into bond prices falling, pushing their yields higher.

Also, there is the unknown of how President Trump's administration may affect the markets. We can't forget that his party will control both chambers of congress also. There has been a lot of tariff talk that has many economists predicting inflation may rise next year instead of falling if he follows through with his threats of broad and sizable tariffs. Inflation is the number one nemesis of the bond market. As inflation rises, a bond's future fixed interest payments become less valuable to investors. This leads to selling bonds at a discount and also pushes yields (and mortgage rates) higher. The first couple months of the year will help clarify what we can expect in 2025 and 2026.

Back to current times. The bond market will close at 2:00 PM ET today ahead of tomorrow's New Year's Day holiday and reopen Thursday. Stocks will trade a full session today, but will be closed tomorrow also. It is still possible to see some year-end trading today to close positions and book profits on certain holdings. However, the impact on mortgage rates should be minimal.

Last week's unemployment update will be released when the markets reopen Thursday morning. It is expected to show a weekly increase in new claims for jobless benefits, hinting at weakness in the employment sector. Analysts are predicting around 224,000 initial filings were made last week. The lack of other scheduled events this week could cause bonds to have a stronger reaction to this weekly report than it usually does. The higher the number, the better the news for rates.

We would like to take this opportunity to wish everyone a wonderful and safe holiday!

 ©Mortgage Commentary 2025