M
ortgage rates continue their downward trend for a third consecutive week, with the 30-year fixed-rate mortgage averaging 6.6%, its lowest level since late October. This decline has sparked an uptick in homebuying demand, according to Redfin, as well as an increase in mortgage applications.

    Key factors influencing rate volatility include the Federal Reserve's consideration of a rate cut, rising inflation, and the incoming administration's policies. Analysts predict a 25-point interest rate cut next week, despite the Consumer Price Index (CPI) report showing a 0.3% rise in November and 2.7% annual increase.

    The CPI bump may not deter the Fed from cutting rates, as other aspects of the report suggest a rate reduction is warranted. However, the pace of rate cuts may slow in 2025 due to strong economic data and ongoing inflation concerns. If this happens, mortgage rates are expected to remain in the mid-6% range throughout next year.

    As mortgage rates trend downward, homebuying demand continues to rise, with indicators showing an increase in home tours, mortgage applications, and pending sales. While not a buying frenzy, demand is returning to more typical levels following a slow summer and fall. Active listings are up 11.3% year-over-year, providing buyers with more choices compared to this time last year.

    Total mortgage applications increased by 5.4% compared to the previous week, driven primarily by refinance applications for VA loans. Purchase applications remained strong, supported by sustained housing demand and growing inventory in many markets.