Quiet Finish for Mortgage Markets
With a lack of major economic news, the final couple of weeks of 2025 were relatively quiet for mortgage markets. While recent data suggests that economic growth remains on track, consumers are concerned about the outlook for the new year. Mortgage rates ended last week just slightly higher.
Labor Market Conditions
The latest confidence survey published by the Conference Board revealed that consumers remain worried about the economic outlook and the impact of higher tariffs. In December, the index unexpectedly dropped to the lowest level since the new tariffs in April. The decline was steepest among younger and lower-income consumers. In particular, the outlook for future labor market conditions weakened.
GDP Growth Beats Expectations
Gross Domestic Product (GDP) is the broadest measure of economic activity. Delayed nearly two months by the government shutdown, the report released last week covers the period from July through September, making this data fairly backward-looking. During the third quarter of 2025, U.S. GDP grew at an annualized rate of 4.3%, up from 3.8% in the second quarter, and well above the consensus forecast for an increase of 3.2%. This was the strongest expansion since the third quarter of 2023. Economists from one firm estimated that nearly 70% of the growth came from spending related to Artificial Intelligence and household consumption. Consumer spending rose by a solid 3.5% in the third quarter following a 2.5% increase in the second quarter. Strength was also seen in government spending and exports.
Home Price Growth Slows
The latest data on home prices from the Federal Housing Finance Agency was encouraging for buyers struggling with affordability. In October, average home prices were just 1.7% higher than a year ago, the smallest annual price increase since March 2012. During the pandemic, annual gains of around 20% were often seen. This also may be a positive sign for future inflationary pressures, since the housing component accounts for a large portion of the inflation index.
Mortgage Rates for the week of 01-05-2026