Raise your hand if you thought mortgage rates would go down after the Fed cut rates again for the third time this year? Sadly you would be wrong! That’s right everyone is in the Christmas spirit except for mortgage rates. So what gives?

In his press conference on Wednesday Fed chairman Jerome Powell basically said that the economy is doing well enough that a slower pace of rate cuts going forward should be expected. Previously the market was expecting four cuts next year and now that got cut in half. It was those comments that sent rates higher. Is that justified? Lets just put it this way, we’ve never seen mortgage rates go up this high after the Fed starting to cut rates. I think the markets are expecting inflation to come roaring back like it did in the 70’s. The data that came out just doesn’t support that. There was an inflation report that came out today that came in below expectations. That trend should continue the next couple of months as elevated reading from Jan and Feb of this year get replaced with lower numbers. While it might be harder to get inflation back to the goal of 2% I don’t think that inflation has a chance to reaccelerate in any meaningful way.

So where do we go from here? It’s hard to see how rates could go much higher from here honestly. Mortgage rates peaked this year back in April around 7.5% before the Fed started cutting rates and it was uncertain how many times they would cut at that point. Are you telling me that somehow we will reach those levels again after the Fed cut basically four times already with more expected next year? To me it would take shocking inflation data to justify that which I don’t see. In the meantime we may have to ride out this holiday season without much cheer from mortgage rates.

Lastly I just wanted to say thank you all for reading these updates this year. I hope everyone has a wonderful Christmas and a Happy New Year!