Mortgage Outlook: Rates Stay Low as December Deadlines Loom

Holden LewisNov 30, 2020
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December mortgage rates forecast

The good news is that mortgage rates are unlikely to rise in December. The bad news is why: The United States faces much economic uncertainty.

At least three expiration dates are coming up in December, with no guarantee that they will be addressed or extended:

Dec. 11: If the White House and Congress can't agree on a spending plan by this date, a government shutdown could follow.

Dec. 26: Extensions of two federal unemployment benefits — Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation — are set to expire this day or the next, depending on state of residence. If unemployed people lose their benefits, they will have less money to spend, further contracting an economy that's already in recession.

Dec. 31: An eviction moratorium for nonpayment of rent expires. This moratorium was issued by the Centers for Disease Control and Prevention because, in the CDC's words, "evictions threaten to increase the spread of COVID-19." A wave of evictions could cost social safety net programs more than $60 billion, according to a joint study from the National Low Income Housing Coalition and the Innovation for Justice Program at the University of Arizona's law school.

The most recent government shutdown lasted from Dec. 22, 2018, to Jan. 25, 2019. The average rate on the 30-year fixed-rate mortgage didn't vary much during that 35-day period, staying in a range of 4.53% to 4.7%.

But the rate fell before the shutdown and again after the shutdown ended. A month before the shutdown began, the 30-year fixed-rate mortgage averaged 4.95%; one month after it ended, the 30-year averaged 4.48%, having fallen almost half a percentage point.

If history is a reliable guide, mortgage rates could fall before Dec. 11 if a shutdown seems imminent. But history isn't always a reliable forecaster. The 30-year mortgage has averaged below 3% APR since early September in NerdWallet's daily survey. There's not much room for mortgage rates to fall further.

Mortgage rates do have plenty of room to rise. But they're unlikely to go up substantially until the economy emerges from recession. A government shutdown, an expiration of unemployment benefits and a wave of evictions would be more likely to intensify the economic downturn rather than relieve it.

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