Will Mortgage Rates Really Fall After The Fed's Interest Rate Cut?

Mortgage rates are unlikely to plunge after this week's Federal Reserve meeting, but borrowers could see a slow, uneven drift lower rather than an immediate break, economists and housing forecasters say.

Fed Rate Cut Largely Priced Into Markets

The Fed is widely expected to deliver a quarter-point cut at its Dec. 9-10 meeting, with futures markets putting the odds near 90% according to Reuters, which would take the federal funds rate to about 3.5%?3.75%.

The average 30-year fixed mortgage rate has already eased to roughly 6.2%, its lowest level in weeks and down from about 6.7% a year ago, according to Freddie Mac. The Associated Press notes that rates have been "mostly falling since late July on expectations of a Fed rate cut," highlighting that mortgage costs often move ahead of the central bank rather than after it.

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Powell's Guidance Will Steer Mortgage Rate Direction

Whether they drop further depends on how the market reacts to Fed Chair Jerome Powell's guidance. An AP preview published on Tuesday says the Fed is "likely to lower borrowing costs this week, but follow-up rate cuts face longer odds," while a Reuters poll of more than 100 economists also points to a single quarter-point move coupled with cautious messaging about 2026.

Since 30-year mortgages track the 10-year Treasury yield and investor expectations more than the Fed's short-term rate, bond traders may have already "priced in" this cut, limiting additional immediate relief for borrowers. A refinancing boom broke out in September as mortgage rates fell ahead of an earlier Fed cut, not after it.

Forecasters See Long Glide Path For Borrowers

As for how soon rates could meaningfully fall, major forecasters see a long glide path. Fannie Mae's Economic and Strategic Research group now projects 30-year rates will end 2025 around 6.3% and only slip to about 5.9% by the end of 2026.

Bank of America’s Aditya Bhave, speaking to Benzinga in October, said that he sees something closer to 5% as the level needed to truly "unfreeze" home sales stuck near post-2008 lows. In the near term, that suggests any post-meeting drop in mortgage rates is likely to be measured in tenths of a percentage point over the coming weeks and not a rapid return to the ultra-cheap loans of the pandemic era.

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