Weekly Mortgage Rates

December 9, 2025

You Don’t Know What You’ve Got till It’s Gone

Mortgage rates have been on the move higher since the Thanksgiving week lows. All attempts to break below that key resistance towards even lower rates have failed.

Now we have broken through two critical support levels for rates, moving us out of our long-standing September trading range - in the wrong direction. A concerning move ahead of the Fed meeting tomorrow where a rate cut has already been priced into current mortgage rates. We hope that we can claw back to our familiar trading range again after the Fed meeting tomorrow. 

The K Shaped Economy

Last week data from the ISM manufacturing and services sector showed manufacturing remains in contraction with slow labor growth, while the services sector showed expansion and steady employment. Inflation components rose in both sectors.

Labor stress also showed up with Challenger job losses at 71k for November, bringing the total to 1.17 mil in 2025 - a 54% increase from last year. ADP private payrolls reporting a 32k job loss with the concentration of losses in small business layoffs, while mid-to-large companies showed a gain.

A K shaped economy describes the current situation. The top half is thriving with stocks at all-time highs and some sectors of the economy remaining strong. At the same time the bottom half is falling further behind. 

This dynamic makes Fed’s job much harder. Their dual mandate – maximum employment and price stability is in conflict. If they lower rates to support the labor market for the bottom half, it can overstimulate the top half and fuel inflation. Leading to a vicious cycle.

The Feds Role in Mortgage Rates

Mortgagerates have been on the rise despite the expected Fed cut this week on the backdrop of increased inflation concerns, increasing bond yields in Japan adding pressure, and expectations that tomorrow’s rate cut will include squashing hopes that the rate cut path will continue next year.

It seems that markets have already moved on to the 2026 outlook - which will bring a new Fed Chair to replace Powell, a Fed board that is more divided than ever, and concerns over the Fed remaining independent of political influence.

While mortgage rates are influenced by Fed policy, the rates are set by activity in the bond market, specifically long-term bonds. With a K-shaped economy, the Fed’s ability to control the economy is hindered so it is possible for the Fed to continue cutting short-term rates while long-term rates rise. We have already seen mortgage rates not responding to recent Fed cuts or moving in the opposite direction.

What’s Ahead

The Fed meeting concludes Wednesday, the press conference after and the release of the economic projections will be key.  We get a chance to take the temperature on the bond market with a 30-year bond auction that hits right before the Fed meeting. Wednesday will be interesting.

Market Strategies

Conventional loans no longer have a minimum 620 FICO score requirement.  Instead, lenders will rely on the risk analysis built into our automated underwriting system. The system has learned the behaviors of borrowers who perform well. Instead of just looking at that 3-digit number, it can look at things like spending habits, credit use, reserves, and job stability to make a decision.  

Some lenders will continue to add a minimum FICO score overlay or price the loan much higher to make it not viable. If you have a borrower who seems otherwise credit-worthy, make sure your clients get a second opinion or revisit their options now to see if they can benefit from this change.