Rates End Year Near 15-Month Lows

What Is Happening Today

Mortgage rates are essentially unchanged today, moving within an extremely tight range near their lowest levels of the year. After yesterday marked the strongest rate pricing of 2025, today’s movement has been minimal, with average rates ticking higher by just 0.01%. This type of slow movement is typical during the final week of the year when trading volume is lighter and fewer economic reports are released.

Even though the bond market is fully open, year end conditions tend to limit volatility. Larger rate swings are more likely once markets return to full participation next week and investors refocus on incoming economic data. For now, rates are holding steady and remain close to recent lows.

Federal Reserve Signals

Minutes from the December 10 Federal Reserve meeting were released
Most Fed members supported cutting rates further if inflation continues easing
Some members preferred keeping rates unchanged for a longer period
Core inflation dropped from 3% to 2.6% based on October and November data
Several officials noted that inflation may stay somewhat elevated in the near term before moving closer to 2%

The minutes reflect a divided Fed, but one that generally expects inflation to continue cooling.

Labor Market Observations

Fed officials agreed the labor market has been softening
The unemployment rate rose from 4.4% to 4.6% in November
Survey data points to fewer job openings and planned layoffs
Weekly claims and job postings suggest some areas of stability
Many recent job gains have been concentrated in healthcare and education

These trends suggest risks to the labor market may be skewed toward further weakening.

Federal Balance Sheet Activity

The Fed began purchasing $40 billion per month in short term Treasury bills
This was done to address declining reserves and liquidity concerns
The Fed expects to purchase $220 billion over the first year
Purchases are expected to taper but remain meaningful
Issuing shorter term debt instead of long term debt could help reduce longer term rates

These actions may provide indirect support for mortgage rates over time.

Jobless Claims Snapshot

Initial jobless claims fell by 16,000 to 199,000
Holiday timing often pushes claims lower in late December
Employers are typically less likely to lay off workers around Christmas
Continuing claims fell by 47,000 to 1.886 million
Some of the decline may be tied to claims expiring after 26 weeks

While claims data looks strong on the surface, seasonal effects likely played a role.

What to Watch Next Week

Wednesday: ADP employment report and JOLTS data
Thursday: Weekly jobless claims
Friday: Housing starts and the BLS jobs report

These reports could reintroduce more meaningful rate movement as markets return from the holiday lull.

Bottom Line

Mortgage rates remain locked in a very narrow range near their lowest levels of the year, reflecting calm year end trading rather than a shift in fundamentals. The Federal Reserve minutes suggest policymakers still expect inflation to ease and the labor market to soften, which supports the longer term case for lower rates.

In the short term, limited volume and fewer economic reports are keeping rate movement muted. As markets transition into the new year and more data is released, rates may become more responsive. For now, stability remains the dominant theme as 2025 comes to a close.