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

Core Viewpoint - Mortgage rates are expected to experience a slow and uneven decline rather than a significant drop following the upcoming Federal Reserve meeting, according to economists and housing forecasters Group 1: Federal Reserve Actions - The Federal Reserve is anticipated to implement a quarter-point rate cut at its December 9-10 meeting, with futures markets indicating a nearly 90% probability, which would adjust the federal funds rate to approximately 3.5%–3.75% [2] - Fed Chair Jerome Powell's guidance will significantly influence the direction of mortgage rates, with expectations of cautious messaging regarding future rate cuts beyond the immediate meeting [4] Group 2: Current Mortgage Rates - The average 30-year fixed mortgage rate has decreased to around 6.2%, down from approximately 6.7% a year ago, reflecting a trend of falling rates since late July due to expectations of a Fed rate cut [3] - Mortgage rates typically respond to investor expectations and the 10-year Treasury yield rather than the Fed's short-term rate, suggesting that the recent decline may have already been factored into current rates [5] Group 3: Future Projections - Major forecasters, including Fannie Mae's Economic and Strategic Research group, predict that 30-year mortgage rates will end 2025 at about 6.3% and only decrease to around 5.9% by the end of 2026, indicating a prolonged period of elevated rates [7] - Bank of America’s Aditya Bhave suggests that a mortgage rate closer to 5% is necessary to stimulate home sales, which are currently stagnant near post-2008 lows, implying that any immediate post-meeting rate drops will be minimal [8]