Mortgage Rates Drop to One-Year Low – Should You Wait or Hold on to the Fed Now?

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Mortgage rates fall to their lowest level in more than a year

Interest rates on new 30-year mortgages have been falling for several weeks. After falling for nine of the past 10 days, the headline average is now down to 6.40% – its lowest level since early October 2024.

Six weeks ago, the 30-year average had fallen to 6.44%. But interest rates have since rebounded, rising more than a quarter point to 6.71% in late September.

The chart below shows how the average 30-year mortgage has moved over the past year.

The Fed will likely cut interest rates, but it may not push mortgage rates lower

The Federal Reserve is widely expected to announce a quarter-point rate cut next Wednesday, after a cut of that size in September. Many homebuyers assume this means mortgage rates will soon follow. But that’s not how it works.

The federal funds rate directly affects the costs of short-term borrowing, such as credit cards and personal loans, and interest rates on bank deposits, not long-term loans such as mortgages.

Fixed-rate mortgages are shaped by broader forces: inflation trends, housing demand, and the overall economy. More importantly, they tend to move with the bond market, especially the 10-year Treasury yield. On Tuesday, those yields fell to their lowest level in 13 months.

That’s why mortgage rates move independently of the Fed, sometimes in the opposite direction. Case in point: In late 2024, the Fed cut interest rates by a full percentage point over three months. However, 30-year mortgage interest rates rose about 1.25 points between mid-September and mid-January.

How do you decide when to stop working? Why might waiting be counterproductive?

With the 30-year mortgage now at its lowest level in over a year, this could be a great opportunity for homebuyers who have been waiting to secure it. A lower rate means a lower monthly payment — and a welcome break after months of high borrowing costs.

But with the Federal Reserve widely expected to cut its benchmark interest rate next week, some buyers may wonder if it’s better to wait to see if mortgage interest rates drop further.

The problem is that mortgage rates are unpredictable. Even with the Fed’s cut, there is no guarantee that lenders’ interest rates will improve. As recent volatility has shown, they could instead jump higher after these lows.

For this reason, it’s often better to buy when you’re financially ready and have found the right home, rather than trying to time the market. You can always refinance later if rates drop further, but you can’t refinance to seize a lost home.

How we track the best mortgage rates

The above national and local averages are provided as is via the Zillow Mortgage API, assuming a loan-to-value (LTV) ratio of 80% (i.e. a 20% down payment) and an applicant’s credit score in the range of 680-739. The resulting rates represent what borrowers should expect when receiving quotes from lenders based on their qualifications, which may differ from advertised teaser rates. © Zillow, Inc., 2025. Use subject to Zillow’s Terms of Use.