Source: NerdWallet —
December mortgage rates forecast
Interest rates on fixed-rate mortgages could stabilize or even drift lower in December. Lower mortgage rates would be a welcome respite to conclude a tumultuous year in which rising rates strained people’s ability to buy homes.
There’s room for mortgage rates to move down because, by one measure, they’ve been unnaturally high most of 2022. When we say “by one measure,” we’re talking about the difference between the interest rates that home buyers pay on their mortgages compared with the interest rates that the federal government pays on its debts. Specifically, it’s the gap between 30-year mortgage rates and the yield on 10-year Treasury notes — what economy geeks call the “primary mortgage spread.”
Why the primary mortgage spread widened
From 2009 until recently, the primary mortgage spread tended to be less than two percentage points. For example, at the beginning of December 2021, the difference, or spread, was 1.5 percentage points: The average rate on the 30-year mortgage was 2.97% and the yield on the 10-year Treasury was 1.47%.
That difference almost doubled in one year, to 2.8 percentage points, as borrowing costs for home buyers have gone up faster than borrowing costs for the federal government. Observers have been asking why. One explanation is that interest rates may go down within a few years, touching off a refinancing boom among borrowers stuck with mortgage rates north of 6%.