Low Mortgage Rates Near 2025 Lows – Should You Settle Now or Wait for the Fed?

Mortgage rates are hovering near a 14-month low

Interest rates on new 30-year mortgages fell last week to nearly their lowest level since October 2024. On Black Friday of this year, the 30-year average fell to 6.36%, just a basis point above the 2025 low of 6.35% hit in late October. Although the headline average has risen slightly in the past few days, it is still at 6.39%.

In early October last year, the 30-year average was as low as 6.32%, although that was an increase from the high of 5% in mid-September. But in early 2025, and again in May, 30-year mortgage rates rose well above the 7% mark.

The Fed is widely expected to cut interest rates, but it may not push mortgage rates lower

The Federal Reserve is widely expected to announce another quarter-point rate cut next Wednesday, after cuts of this size in both September and October. Many homebuyers believe that a Fed cut will lead to lower mortgage interest rates. 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 necessarily 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. In October, those yields fell to their lowest level in nearly 13 months.

This complex web of factors is why mortgage rates move independently of the Fed — and even in the opposite direction. Case in point: In late 2024, the Fed cut interest rates by a full percentage point between September and December. However, 30-year mortgage rates rose about 1.25 points by mid-January. More recently, the Federal Reserve’s two rate cuts this fall were followed by a rise in mortgage rates.

How to decide when to lock in your mortgage rate — and when waiting can backfire

With the 30-year mortgage nearly 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 home you missed.