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Why haven’t mortgage rates been falling since the last Federal Reserve rate cut?
Hal Bundrick, CFP® ·
Senior Writer
Updated
Tue, December 16, 2025 at 3:24 PM EST
3 min read
We've seen it before, but it’s still jarring. The Federal Reserve lowers short-term interest rates, and mortgage rates inexplicably refuse to budge. Will it happen again with the latest Fed action?
What happens when the Fed lowers interest rates
First of all, the Federal Reserve and mortgage rates are working on two ends of a timeline. The Fed steers short-term interest rates, and mortgage rates are influenced by long-term bonds.
When the Fed cuts its federal funds rate, as it did by a quarter-point for the third time in 2025 on Dec. 10, here's what happens:
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The fed funds rate falls. That's the interest rate charged to banks for overnight loans from other banks.
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The prime rate falls. That is the interest rate financial institutions charge to their most-favored customers.
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Savings account rates fall, as do interest paid on certificates of deposit (CDs), and on checking, brokerage, and cash management accounts.
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Loan rates fall. That can include personal loans, home equity loans, and home equity lines of credit (HELOCs).
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A little later, other short-term rates move lower, such as credit card interest rates.
Find out how the Fed rate cut affects your bank accounts, loans, credit cards, and investments.
Mortgage rates are different — here's why
Mortgage rates are longer-term debt, as anyone with a 30-year home loan knows. That's a very long debt runway. The fixed rate you pay is evergreen, with a margin built in to last through many interest rate cycles.
That means it's priced to a longer-term benchmark, such as the 10-year Treasury.
The bond market generally reacts to longer-term events, such as inflation, employment, and macroeconomic trends.
Sometimes, mortgage rates fall after a Fed rate cut. Sometimes, they don't. Many times, they'll decline in expectation of falling short-term interest rates in the weeks leading up to a Fed meeting. Then, occasionally, they bounce back up.
In fact, weekly 30-year fixed mortgage rates generally began dropping on May 29, 2025, from 6.89% all the way down to 6.26% by Sept. 18. The Fed cut rates on Sept. 17, and rates bounced up to 6.30% on Sept. 25.
Finally, rates began slipping lower in October.
On Dec. 10, the Federal Reserve reduced short-term interest rates by another quarter point. According to Zillow, the 30-day fixed mortgage rate was 6.15% on the day of the announcement. A week later, it is 6.14%.
Mortgage rates have a mind of their own.
It's not the Fed that will move mortgage rates; it's the economy
What will it take for mortgage rates to continue a downward trend?
"The path to lower mortgage rates heading into 2026 may be paved if the data backs up the Fed's expectations for continued weaker labor and under-control inflation, potentially breaking below the holding pattern we've seen in recent months," Jeff DerGurahian, head economist at loanDepot, said in an analysis.
It's not the Fed moving mortgage rates; it's the economy.
Don't pin your home-buying hopes on short-term events, day-to-day trends, and all the other things out of your control. Once you have your down payment in hand, a home-buying budget ready to go, and an idea of how much house you can afford, make a real-life plan to buy a house.
Know the mortgage interest rate range you can handle and have your list of potential mortgage lenders lined up.
Then don't look back.
Laura Grace Tarpley edited this article.