Author: Eric BernsteinPublished:
Easy come, easy go. Rates shot back up last week after government spending came to light and hotter than expected inflation reporting didn't roll our way. Luckily, none of this was disappointing enough to deter the market from believing we'll get another rate cut this week.
The average rate on a 30-year fixed rate conventional loan rose to 6.706% (up from 6.56% last week)! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers!
Federal Budget Deficit Continues to Balloon
The U.S. government posted a $367B budget deficit for November, up 17% from a year earlier and more than the $353B expected.
Budget deficits are BAD for mortgage rates. The higher the budget deficit gets, the greater the interest rate that the U.S. needs to pay investors, which pushes the 10-year treasury higher and simultaneously pushes mortgage rates higher. We saw that play out this week!
It would be REALLY nice if we had a government that understood how to balance a budget (and stick to it). There's some hope that new Department of Government Efficiency (DOGE) is going to fix all of our government spending problems, but I'm less optimistic. Considering the Trump administration has a goal of reducing the federal deficit by $876B annually, Musk might have an easier time landing someone on Mars than getting the US government spending under control. 😂
Inflation Reporting Gets a Mixed Reaction
The Consumer Price Index (CPI) and Producer Price Index (PPI) reported last week - 2 HUGE inflation measures.
CPI came in as expected, an increase of 2.7% annually and 0.3% month-over-month. Unfortunately, as expected, still gives many investors cause for concern. Here's why...
September CPI reported a 2.4% increase and October CPI reported a 2.6% increase, meaning inflation is heating up, and even though it's not heating up by much -it's still concerning. Some policymakers are getting frustrated with inflation's resilience and that puts the pace of rate cuts in jeopardy. Slower future rate cuts will translate to higher mortgage rates today.
This inflation report did give us some great news from the shelter costs reading. A measure within the shelter component that asks homeowners what they could get in rent for their properties increased 0.2%, as did the actual rent index. They are the smallest monthly respective increases since April and July 2021.
More troubling, PPI came 2x expectation (increase of 0.4% instead of 0.2%). The producer price index measures what producers get for their products at the final-demand stage. PPI can be an early warning sign for CPI. If producers are paying more, producers will naturally try to pass that cost on to customers. The silver lining on PPI is excluding food and energy, core PPI increased 0.2%, meeting the forecast.
Rate Cut #3 is Here!
Current forecasts show a 96% chance of a rate cut, so while there are no guarantees in life, this is about as close as we can get.
For homebuyers, the rate cut is just a piece of the puzzle. More important than the rate cut is going to be the changes in the Fed's dot plot (showing the expected future Fed Funds Rates) and Powell's commentary at 2:30ET on Wednesday,
Next week is an action packed week with housing data, retail sales data, inflation data and of course the Fed meeting, Follow us on Instagram for immediate reactions to all the news this week.
The average rate on a 30-year fixed rate conventional loan rose to 6.706% (up from 6.56% last week)! Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers!
Federal Budget Deficit Continues to Balloon
The U.S. government posted a $367B budget deficit for November, up 17% from a year earlier and more than the $353B expected.
Budget deficits are BAD for mortgage rates. The higher the budget deficit gets, the greater the interest rate that the U.S. needs to pay investors, which pushes the 10-year treasury higher and simultaneously pushes mortgage rates higher. We saw that play out this week!
It would be REALLY nice if we had a government that understood how to balance a budget (and stick to it). There's some hope that new Department of Government Efficiency (DOGE) is going to fix all of our government spending problems, but I'm less optimistic. Considering the Trump administration has a goal of reducing the federal deficit by $876B annually, Musk might have an easier time landing someone on Mars than getting the US government spending under control. 😂
Inflation Reporting Gets a Mixed Reaction
The Consumer Price Index (CPI) and Producer Price Index (PPI) reported last week - 2 HUGE inflation measures.
CPI came in as expected, an increase of 2.7% annually and 0.3% month-over-month. Unfortunately, as expected, still gives many investors cause for concern. Here's why...
September CPI reported a 2.4% increase and October CPI reported a 2.6% increase, meaning inflation is heating up, and even though it's not heating up by much -it's still concerning. Some policymakers are getting frustrated with inflation's resilience and that puts the pace of rate cuts in jeopardy. Slower future rate cuts will translate to higher mortgage rates today.
This inflation report did give us some great news from the shelter costs reading. A measure within the shelter component that asks homeowners what they could get in rent for their properties increased 0.2%, as did the actual rent index. They are the smallest monthly respective increases since April and July 2021.
More troubling, PPI came 2x expectation (increase of 0.4% instead of 0.2%). The producer price index measures what producers get for their products at the final-demand stage. PPI can be an early warning sign for CPI. If producers are paying more, producers will naturally try to pass that cost on to customers. The silver lining on PPI is excluding food and energy, core PPI increased 0.2%, meeting the forecast.
Rate Cut #3 is Here!
Current forecasts show a 96% chance of a rate cut, so while there are no guarantees in life, this is about as close as we can get.
For homebuyers, the rate cut is just a piece of the puzzle. More important than the rate cut is going to be the changes in the Fed's dot plot (showing the expected future Fed Funds Rates) and Powell's commentary at 2:30ET on Wednesday,
Next week is an action packed week with housing data, retail sales data, inflation data and of course the Fed meeting, Follow us on Instagram for immediate reactions to all the news this week.
Key reporting dates this week:
Mon, 12/16: Empire State manufacturing survey
Tues, 12/17: U.S. retail sales, Home builder confidence index
Wed, 12/18: Housing starts, Building permits, FOMC interest-rate decision, Fed Chair Powell press conference
Thurs, 12/19: Initial jobless claims, Existing home sales
Fri, 12/20: PCE index
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About the Author:
Eric Bernstein is the President and Co-Founder of LendFriend Mortgage, where he helps homebuyers make smarter, more confident decisions in today’s fast-moving housing market. With over a decade of experience guiding hundreds of clients—from first-time buyers to seasoned investors—Eric brings a mix of market insight, strategy, and personalized service to every mortgage transaction. Each week, Eric breaks down the housing and economic headlines that matter, giving readers a clear, no-fluff view of what’s happening and how it might impact their buying power.