In mid-November, mortgage rates saw their biggest decline since 1981. Here’s what 6 pros say will what happen next

For most of 2022, the trend of mortgage rates was generally up and then up some more. But in mid-November something big happened: Thanks to better-than-expected inflation numbers, the average rate on a 30-year fixed-rate mortgage dropped to 6.61% the week of November 17th, which was the biggest weekly decline in roughly 40 years, according to Freddie Mac‘s Primary Mortgage Market survey.  That’s been a relief to borrowers, for sure, but what happens next?  We asked the pros. (See the lowest mortgage rates you may qualify for here.)

Prediction 1: Mortgage rates could rebound

“After a steep and lengthy climb, mortgage rates recently retreated in reaction to data indicating that inflation may have peaked. But the Federal Reserve’s stated commitment to continuing to fight inflation with rate hikes, likely including a rate increase at their December meeting, could send mortgage rates right back up again,” says Kate Wood, home expert at NerdWallet.

And for his part, Greg McBride, chief financial analyst at Bankrate, says: “Mortgage rates have pulled back notably in response to the first bit of hopeful news on the inflation front. As usual, investors are overreacting by taking one month’s data and projecting it into the future. Without more good news on the inflation front next month, mortgage rates could rebound.” See the lowest mortgage rates you may qualify for here.

Prediction 2: But they may simply stabilize

“Data shows that the higher federal funds rates are starting to cool off inflation and thanks to the rate-friendly inflation data, mortgage rates dropped back below 7%. If inflation continues to decelerate over the next several months, mortgage rates will likely stabilize below 7% for the remainder of the year,” says Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors (NAR).

Prediction 3: They could even fall — just don’t expect rates to fall like they did in November 

“Owing to better-than-expected inflation figures, the average 30-year fixed mortgage rate fell from 7.08% for the week ending November 10th to 6.61% for the week ending the 17th. Though this is the largest week-over-week drop in decades, and will make getting a mortgage more affordable, mortgage rates still remain considerably higher than they were in January. I don’t think we should expect to see rates fall by nearly 50 basis points each week,” says Jacob Channel, senior economist at LendingTree.

And Jeff Tucker, Zillow senior economist, says: “After a very volatile autumn, 30-year mortgage rates are settling into the mid-to-upper 6% range. That’s still about double their level at this time last year, but a little relief after peaking above 7% a few weeks ago. There’s not much reason to expect rates will take off upward again, and in fact, if we keep seeing encouraging, lower inflation indicators, there’s a good chance of rates actually declining. To be conservative, I’d still expect them in the low-to-mid 6% range by year’s end.”

See the lowest mortgage rates you may qualify for here.

Bottom line: You’ll have to wait and see what happens

Clearly, the pros don’t fully agree on what happens next. “The market may have overreacted to a better than expected inflation reading in mid-November that led to a nearly one-half percentage point drop in mortgage rates, however, so far there’s been little movement from the new lower level. December is shaping up to set a new trend in one direction or the other and a lot will depend on the consumer price index reading on inflation. This month, the outlook is far more data-dependent than has been typical, given that we are nearer to the step-down and eventual end of the Fed’s tightening cycle,” says Danielle Hale, chief economist at Realtor.com. 

There will be three key dates that determine mortgage rates in December. “Mortgage interest rates for December are expected to trend flat to slightly down, but are ultimately hinging on three key dates for information right now,” explains Taylor Marr, deputy chief economist at Redfin. The first is November’s employment report. If job growth slows, she says that mortgage rates could “come down slightly as the Fed may become more cautious of a faltering labor market.”

The second number to watch is “November’s consumer price index data on December 13, which will indicate if peak inflation is indeed behind us and progress is being made. If inflation continues to show signs of coming down, they may announce a smaller rate hike than what they’ve announced at their last four meetings, says Channel.

Finally, the next day on December 14, the Fed will provide their interest rate decision and economic projections. At this point, markets are expecting a slowdown in rate hikes to 50 basis points from 75, but the outlook for the next year’s rate path will be more significant to what happens with mortgage rates,” says Marr.