Mortgage interest rates were flat this week, but new data on the economy’s health could encourage rates to go down.
The average rate on a 30-year fixed-rate mortgage held steady at 6.14% APR the week ending Dec. 18, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.
Why didn’t mortgage rates drop after the Fed cut?
You might have thought mortgage rates would already be lower, since the Federal Reserve met last week and cut the federal funds rate 25 basis points. Here’s the thing, though — the Fed doesn’t control mortgage rates. If you weren’t sure how that works, you’re in good company: Just 25% of Americans know that the Federal Reserve doesn’t set mortgage interest rates, according to a recent NerdWallet survey conducted online by The Harris Poll.
The Federal Reserve is one ingredient in the mix that determines mortgage rates. While its significance is more like a cup than a teaspoon, it’s not the whole recipe. The central bankers set an influential short-term borrowing rate that often ripples out to affect other interest rates. Fed decisions are also a bellwether for the nation’s economy, providing strong signals on how we’re doing and where we’re headed. That influences the stock and bond markets, with the latter being particularly important for mortgage rates — mortgage rates tend to move similarly to 10-year Treasury bills.
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Why rates have been tougher to predict
Mortgage rates often move ahead of Federal Reserve meetings, as markets gauge the economy’s health and anticipate what the central bankers’ decisions will be. We saw mortgage interest rates fall ahead of the Fed’s September meeting, which brought the first rate cut this year. In the months since, we’ve watched mortgage rates go up and down, though they’ve stayed within a pretty narrow range.
October’s federal government shutdown made it much harder to tell how the economy was faring, because it abruptly cut off the flow of government data. Most October data releases were canceled, and November numbers are just starting to trickle in. That’s made it more difficult for everybody — markets, the Fed, mortgage lenders — to get a clear view of economic conditions.
The arrival of November stats is clearing things up, and potentially making the case for lower mortgage interest rates. This week saw two major data drops, with the Bureau of Labor Statistics releasing the Employment Situation Summary on Dec. 16 and the Consumer Price Index on Dec. 18.
Unemployment worsens
November’s Employment Situation Summary, better known as the jobs report, came in a little higher than expected. This meant that job growth was actually stronger than expected, at 64,000, compared to economists’ predicted 50,000. The bad news was that the unemployment rate was higher than anticipated, too, at 4.6% versus the expected 4.5%.
Though it’s only a little softer than the previous reading, the last time unemployment was this high was September 2021. But bad news for the labor market is, in a twist, good news for mortgage rates. If stock and bond markets start to strongly anticipate a rate cut from the Federal Reserve, mortgage rates could fall in anticipation.
When businesses are struggling, the Fed lowers rates to spur borrowing and hiring. Mortgage rates likewise tend to go lower when times are bad. That’s a big reason we saw ultra-low interest rates during the pandemic. Borrowing was cheap, though we paid a high price to get those rates.
Inflation eases
This morning, the Bureau of Labor Statistics released November’s Consumer Price Index. Market predictions weren’t great, with an expected 3.1% rate of inflation. That would have been a slight increase from the 3% we saw in September, the most recent data available because of the government shutdown. For context, the Federal Reserve targets a 2% rate of inflation, and the U.S. has been above that since March 2021.
The November CPI numbers came as a pleasant surprise, with inflation apparently slowing to an overall rate of 2.7% year over year. With this slowing, the Fed has a bit more evidence in favor of lower interest rates. Raising the federal funds rate is the central bankers’ key tool for taming inflation; if inflation’s relatively under control, bolstering the job market by lowering rates is more likely.
Coupled with the jobs report data, these latest inflation numbers could give mortgage rates some downward momentum. While times might feel uncertain for homebuying, 2026 may bring good news for current homeowners hoping to refinance out of higher interest rates.
Methodology
This survey was conducted online by The Harris Poll on behalf of NerdWallet from Nov. 3-5, 2025, among 2,094 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. For this study, the sample data is accurate to within +/- 2.5 percentage points using a 95% confidence level. This credible interval will be wider among subsets of the surveyed population of interest. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact [email protected].
