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Mortgage rates today: Tuesday, December 7, 2021
On Tuesday, Dec. 7, 2021, the average interest rate on a 30-year fixed-rate mortgage went up one basis point to 3.036% APR. The average rate on a 15-year fixed-rate mortgage rose three basis points to 2.34% APR and the average rate on a 5/1 adjustable-rate mortgage dropped one basis point to 2.81% APR, according to rates provided to NerdWallet by Zillow. The 30-year fixed-rate mortgage is seven basis points higher than one week ago and 21 basis points higher than one year ago. A basis point is one one-hundredth of one percent. Rates are expressed as an annual percentage rate, or APR.
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Mortgage rates this week
Fixed mortgage rates took the tiniest step down in the week ending Dec. 2, meaning they effectively were unchanged.
The 30-year fixed-rate mortgage averaged 3.02% APR, down one basis point from the previous week's average.
The 15-year fixed-rate mortgage averaged 2.33% APR, down two basis points from the previous week's average.
The five-year adjustable-rate mortgage averaged 2.74% APR, up 18 basis points from the previous week's average.
The 30-year mortgage has been on a bumpy upward trajectory since September, driven by rising employment and high inflation. "Bumpy" means rates are acting like an airliner climbing through a rainstorm — there may be downward jolts on the way up, but over time the ground is drawing farther away.
The past week's downdraft may have come from the emergence of the omicron variant of the coronavirus. The variant's impact on the economy is unpredictable. With so much unknown, omicron's effect on interest rates has been mild. If we’re lucky, its effect on people will be mild, too.
Fed increase could come sooner than later
Inflation and employment influence the direction of mortgage rates. During the week after Thanksgiving, as mortgage bond traders awaited the November employment report coming out Dec. 3, they weren't making big trades. That dampened rate movement.
Another development during the week shored up the floor under mortgage rates. Jerome Powell, chairman of the Federal Reserve, said at a Senate hearing that the central bank might give interest rates an upward shove sooner than it had been planning.
The Fed has been buying billions of dollars each month of U.S. government and mortgage debt to keep interest rates low. It is reducing those monthly purchases, with the initial aim of letting them dwindle to nothing by next June. The central bank had been expected to raise the federal funds rate sometime after that, sending the prime rate and other interest rates upward, too.
But Powell told senators that inflation might persuade the central bank to accelerate its timetable and pivot from recession-fighting mode to inflation-fighting mode by the middle of 2022.
Despite this week's breather, mortgage rates are likely to continue trending upward.
December mortgage rates forecast
I expect mortgage rates to rise modestly in December, especially toward the end of the month.
As we approach the end of 2021, bond traders will cash out so they can take a few days off without worrying about having to react to abrupt price changes. When the traders sell their mortgage-backed securities just before Christmas, the prices will go down and yields will go up. Mortgage rates will follow yields on that upward trajectory.
In short, I think much of December's rate increase will happen in the last week or so of the year.
Turning to 2022
Then rates are likely to continue trending upward through 2022. Rates will go up for the foreseeable future because inflation will remain elevated, the Federal Reserve will raise short-term interest rates next year, and hiring will remain strong.
Rates are likely to go up enough to notice. In our look ahead to 2022 housing market trends, my colleague Kate Wood and I compiled mortgage-rate predictions from Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors. When their forecasts are aggregated, they call for the 30-year fixed-rate mortgage to rise about three-eighths of a percentage point in 2022.
That would put the 30-year fixed a little under 3.5% toward the end of 2022 in NerdWallet's daily mortgage rate survey.
A year ago, their aggregated forecast was for the average rate on the 30-year fixed to remain essentially unchanged or slightly lower in 2021. Instead, the year's average rate fell more than a quarter of a percentage point — from 3.27% in 2020 to 2.95% through mid-November this year.
What that forecast got correct
I look at that year-ago prediction in two ways. The forecasters were wrong in their aggregated prediction that mortgage rates would stay about the same. But they were right about something more important: that rates, when averaged for the year, wouldn't be higher in 2021 than in 2020.
That prediction wasn't exactly bold, but it wasn't intuitive, either. Mortgage rates were low in 2020, with little room to go down and a lot of room to go up. The COVID-19 recession looked like it was ending, and vaccines were on the way. An economic recovery would tend to push mortgage rates higher.
But mortgage rates didn't move much in 2021 until they turned upward in late September. The forecast is for them to assume an upward trend throughout 2022.
What happened in November
As November dawned, I predicted that inflation would push mortgage rates higher but they wouldn't rise steeply.
But instead of the slow rise that I expected, mortgage rates meandered up and down most of November. The average rate on the 30-year fixed-rate mortgage was almost the same as October's — despite inflation rising to 6.2%, according to the Consumer Price Index.
