Will Mortgage Rates Fall After the December Fed Meeting?

Will mortgage rates rise after the Fed meets?

Will the Federal Reserve’s next Open Market Committee meeting on December 9-10 come with a rate cut? Or will the committee keep rates steady (or possibly even raise them)?

The annualized inflation rate does remain above the Fed’s long-term goal of 2%, most recently inching up to 3% in September from 2.9% in August and 2.7% in July.

The central bank held rates steady at its first five meetings of 2025 before making cuts in September and October. How will the latest economic indicators weigh on December’s Fed cut decision and impact mortgage rates?

Will the Fed cut rates in December?

The FOMC cut the federal funds rate range by 25 basis points at each of its last two meetings following the five straight holds to start the year.

The central bank waited for sustainable economic softness before loosening its monetary policy in 2024. Many experts anticipated more cuts and gradually descending interest rates in 2025. However, the Trump administration’s wealth and power consolidation creates uncertainty and vulnerability, and pushed additional cuts later on the calendar.

As the Fed’s job includes stabilizing the U.S. financial system and setting monetary policy, it’s responsible for maintaining a long-term inflation rate of 2%. Holding inflation near that level keeps consumer prices steady.

The annualized inflation rate began surging in 2021, ultimately spiking to a 41-year high of 9.1% in June 2022, according to the U.S. Bureau of Labor Statistics. That year, the Federal Open Market Committee (FOMC) hiked the federal funds rate as a counterbalance.

Since then, the Fed adjusted its monetary tightening policy multiple times. Most recently, the central bank cut the fed funds rate by 25 basis points in October and September, after holding it in July and June.

The latest inflation reading grew to 3% in September from 2.9% in August and 2.7% in July, according to the Bureau of Labor Statistics*. Despite rising inflation, murky economic data and a worsening jobs market drives a majority belief that December’s FOMC meeting results in a third-straight quarter-point cut.

*In August, President Trump fired the Bureau of Labor Statistics commissioner following a weak employment report.

Interest rate descension could continue

Interest rates rollercoastered throughout the last three years, with the average 30-year fixed mortgage ranging from 6.08% to 7.79%, according to Freddie Mac. Most recently, the average 30-year fixed rate mortgage reached 6.23% on Nov. 26.

Although the annualized pace of inflation stagnated since 2024, it still sits above the Fed’s goal. Because of this, tightening monetary policies could always return until inflation gets brought down to a normalized level. Interest rates are notoriously difficult to predict but typically rise in response to Fed tightening and fall with loosening.

Some lenders will allow you to lock in a rate for 90 days at little or no cost so you’re protected from higher rates if you don’t close quickly. A few examples of lenders offering this include AmeriSave Mortgage, Quicken Loans, and Rocket Mortgage.

Some lenders are even offering borrowers refinances without repeat lending fees or appraisal fees when rates eventually hit a down cycle. When mortgage shopping, be sure to ask your loan officer about these and potentially other incentive services.

Mortgage rates and the Fed’s role

The Federal Reserve doesn’t determine mortgage rates. Instead, rates are intrinsically tied to Treasury yields, which typically follow the Fed’s actions. The latest FOMC projection materials show more rate cuts could be in store over the next year, with the caveat that they will make policy adjustments as necessary.

The fed funds rate is the amount banks pay to borrow money from each other overnight and an increase signals higher inflation and economic expansion. Mortgage interest rates typically rise in response to growth in the fed funds rate.

How mortgage rates respond in the immediate aftermath of these FOMC meetings has been a mixed bag over the last year. Following the three most recent rate decisions, they fell two basis points (0.02%) after July’s hold, then respectively dropped nine (0.09%) and two (0.02%) after cuts in September and October.

Advice for borrowers

So, should you lock in a rate or wait?

Mortgage rates stayed in a tight range over the past few weeks, perhaps in a holding pattern as the Fed peers through the fog. While we don’t have the rock-bottom rates from Covid’s peak, they’re still below average historically and hover near annual lows. Plus, borrowers refinance during rate downcycles. Many people build wealth and a financial cushion through home equity.

“Mortgage rates tend to fluctuate, I always advise buyers to focus on their specific budget and needs rather than trying to predict economic factors,” said Nick Boniakowski, head of agent partnerships at Opendoor.

If you’re ready to become a homeowner, speak with a local mortgage lender to see what loans and interest rates you can qualify for ahead of December’s Fed meeting.