by Calculated Risk on 12/11/2025 01:12:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Mortgage Rates: The New Normal

A brief excerpt:

In June 2023, I wrote: Could 6% to 7% 30-Year Mortgage Rates be the "New Normal"?

At that time, the Fed Funds rate was set at 5 to 5-1/4 percent and the Ten Year Treasury was yielding 3-3/4%. I noted in 2023: “the 10-year yield would likely increase even as the Fed lowers the Fed Funds rate.”

And that is what happened. The 10-year is yielding 4-1/4% this morning. This is a key point. Just because the FOMC is cutting rates, doesn’t necessarily mean long rates will follow.

Note: For a discussion of the R* and the neutral rate, see housing economist Tom Lawler's post on Tuesday.

[I]f, as expected, the FOMC decides to cut its federal funds rate target by 25 bp tomorrow, then the resulting level of the federal funds rate will be very close to the neutral nominal policy rate.

The following graph is from Mortgage News Daily and shows the 30-year mortgage rate since 2000. Rates were in the 5.5% to 6.5% range prior to the housing bust and financial crisis. Then rates were in the 3.5% to 5% range for over a decade prior to the pandemic. Currently rates are at 6.30% for 30-year mortgage rates.

There is much more in the article.