Will Mortgage Rates Fall After the January Fed Meeting?

Will mortgage rates rise after the Fed meets?

Will the Federal Reserve’s next Open Market Committee meeting on January 27-28 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 holding at 2.7% in November and December.

In 2025, the central bank held rates steady at its first five meetings before making cuts in the final three. How will the latest economic indicators weigh on January’s Fed cut decision and impact mortgage rates?

Will the Fed cut rates in January?

The Federal Reserve Open Market Committee cut the federal funds rate range by 25 basis points at each of its last three meetings in 2025, following five straight holds to start the year.

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. The central bank waited for sustainable economic softness before loosening its monetary policy in 2024 and 2025. Most recently, the FOMC cut the fed funds rate by 25 basis points in September, October and December.

Many experts anticipate more cuts and gradually descending interest rates in 2026. However, the Trump administration’s wealth and power consolidation creates uncertainty and vulnerability, and could change the FOMC’s plans at any time.

The latest inflation reading held flat at 2.7% in December from November, according to the Bureau of Labor Statistics*. Despite murky economic data and a worsening jobs market, a vast majority of the market believes the FOMC will hold in January, reverting to its wait-and-see approach following three straight cuts.

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

Interest rate descension could continue

Since the start of 2023, the average 30-year fixed mortgage interest rate ranged from 6.06% to 7.79%, according to Freddie Mac. Most recently, the average 30-year fixed rate mortgage reached 6.06% on Jan. 15.

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. 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 nine basis points (-0.09%) after September’s cut, two (-0.02%) after October’s, and rose three (+0.03%) after December’s.

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 three-year lows. Plus, borrowers can refinance during rate downcycles and 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 January’s Fed meeting.