🏦 Fed Rate vs. Mortgage Rate: What's the Difference?
Many people think the Fed directly controls mortgage rates. It doesn't. Here's how they're actually connected:
🏛️ Federal Funds Rate
- • Rate banks charge each other overnight
- • Directly controlled by the Fed
- • Affects short-term rates (credit cards, HELOCs)
- • Currently: 4.50-4.75%
🏠 Mortgage Rates
- • Based on 10-year Treasury yields
- • Influenced by inflation expectations
- • Affected by MBS market demand
- • Currently: ~6.5% (30-year fixed)
💡 The Key Insight
Mortgage rates are more closely tied to the 10-year Treasury yield than the Fed funds rate. When the Fed cuts rates but inflation expectations rise, mortgage rates can actually go UP!
📊 What Happened After Recent Fed Cuts?
Let's look at how mortgage rates reacted to the Fed's 2024 rate cuts:
| Fed Meeting | Fed Action | 30-Yr Mortgage Before | 30-Yr Mortgage After (1 week) |
|---|---|---|---|
| Sep 2024 | -0.50% | 6.20% | 6.35% ↑ |
| Nov 2024 | -0.25% | 6.79% | 6.81% ↑ |
| Dec 2024 | -0.25% | 6.60% | 6.52% ↓ |
| Sep 2025 | -0.25% | 6.45% | 6.38% ↓ |
⚠️ The Lesson
Fed rate cuts don't always lower mortgage rates immediately. In fact, mortgage rates sometimes increase after Fed cuts due to inflation concerns or market dynamics.
🔮 December 2025 Expectations
What Experts Predict:
Fed likely to cut 0.25%
85%+ probability per CME FedWatch Tool
Mortgage rates may not move much
The cut is already "priced in" to current rates
2026 outlook matters more
Fed's forward guidance will impact rates more than this single cut
Best Case
6.25%
If Fed signals more cuts
Most Likely
6.40-6.50%
Minimal change
Worst Case
6.60%+
If Fed signals pause
🎯 What Should You Do?
If You're Buying a Home:
Don't try to time the market. Get pre-approved now and lock your rate when you find a home. Waiting for "perfect" rates often means missing good opportunities.
Get pre-approved today →If You're Refinancing:
If you're at 7%+ and can get 6.5% or lower, it may be worth refinancing now. Don't wait for rates that may never come. Run the numbers with a refinance calculator.
Check refinance rates →If You're Waiting:
Rates may drop to 5.5-6% by late 2026, but that's not guaranteed. Home prices are still rising. Waiting could cost you more than you'd save on rates.
Read: Should you buy now or wait? →💡 The Smart Strategy
Buy when you're ready, not when rates are "perfect." You can always refinance later if rates drop significantly. But you can't go back in time to buy at today's prices.
Compare Today's Best Rates →❓ Fed Rate Cut FAQ
Will mortgage rates drop after the Fed cuts?
Not necessarily. Mortgage rates are based on 10-year Treasury yields, not the Fed funds rate. If the cut is already expected (priced in), rates may not move at all.
Should I wait to lock my rate until after the Fed meeting?
Risky strategy. Rates could go up or down. If you have a good rate now, consider locking it. You can always ask about a float-down option if rates drop.
How many more rate cuts are expected in 2026?
Markets currently expect 2-4 more cuts in 2026, bringing the Fed funds rate to around 3.5-4%. However, this depends on inflation and economic conditions.
🏠 Don't Wait for the "Perfect" Rate!
The best time to buy is when you're financially ready. Get pre-approved today and see what rates you qualify for right now!