As we close out the year, the mortgage market is facing persistent rate pressure, evolving Federal Reserve dynamics, and a notable absence of fresh economic data. In the latest episode of Optimal Insights, Jim Glennon, Alex Hebner, and James Cahill discuss the trends and signals shaping the industry, offering perspective on what to watch as we approach the final FOMC meeting of 2025.
Here’s what you need to know this week.
Market Pulse: Rates, Volume, and the Data Gap
Mortgage rates remain above 6%, with the latest reading at 6.14%. The 10-year Treasury yield sits at 4.09%, and the spread continues to compress – yet not enough to drive rates meaningfully lower.
Despite the holiday period, lock volume has held steady, bucking the usual year-end slowdown.
The aftereffects of the government shutdown linger, leaving the industry with limited visibility into employment and inflation metrics.
“We’re definitely still kind of at the tail end of this drought of data we’ve been in for six to eight weeks or so now. Hopefully beginning next week, we’ll start to see that pick up as the delayed numbers begin to come out for November.” – Alex Hebner
Fed Dissension and Its Implications
Historical Perspective and Current Dynamics
The Federal Reserve’s internal consensus is showing signs of strain. While previous years saw near-unanimous voting, recent meetings have surfaced more vocal dissent – particularly around the direction of rate policy. This shift introduces new complexity for mortgage professionals, as the market weighs the impact of a divided Fed.
Dissenters Emerge: Only one official dissent was recorded at the last meeting, but several members have indicated a willingness to break from the majority. This could signal a move toward a more fragmented decision-making process.
Market Impact: The lack of clear consensus is contributing to rate volatility and uncertainty, especially for longer-term mortgage products.
“There’s more dissenters that do not want to cut rates, which goes against what the administration would like, against what I think a lot of folks in the mortgage industry would like, but starting to see more dissent… kind of keeps market rates higher.” – Jim Glennon
Leadership Transition: What to Expect
Washington rumors point to Kevin Hassett as the likely nominee for Fed Chair, with additional appointments expected to shift the composition toward a more market-friendly stance. While immediate, dramatic changes are unlikely, the evolving leadership could influence the rate environment over the coming year.
“It felt, four or five months ago, the White House will just have control of the Fed by now. It hasn’t happened, but it is just a certain thing. It will happen over the next coming months, just with the turnover there.” – James Cahill
Actionable Advice for Mortgage Professionals
Watch Key Indicators: With the non-farm payroll report delayed, focus on ADP private payrolls and PCE inflation data for near-term market signals.
Plan for Volatility: The emerging split within the Fed suggests heightened rate volatility. Consider hedging strategies and scenario planning as the market digests new leadership and policy signals.
Stay Flexible: As the Fed’s composition evolves, be prepared to adjust pricing models and risk assessments in response to changing rate expectations.
The mortgage market enters December with more questions than answers. Persistent rate pressure, delayed data, and a shifting Fed landscape are shaping a complex environment for housing finance professionals. While immediate changes may be limited, the coming months promise significant developments in leadership and policy orientation.
Tune in to Optimal Insights for the latest perspectives from the experts at Optimal Blue. Available on all major podcast platforms: https://optimal-insights.captivate.fm/listen
The views and opinions expressed in this program are those of the speakers and do not necessarily reflect the views or positions of Optimal Blue, LLC.