Mortgage Rates fall, but not for Mthe reasons you are led to believe.
Hi Friends, month of treasures from the markets.
ortgage rates remain volatile By changing their stance from a seller but are slowly to a buyer of treasuries, the Fed can heading manipulate the supply and demand downwards. The of bonds, which reduces the bond Federal Reserve yield and mortgage rates. cut their target rate, More demand than the Fed Funds, for the third supply causes bond time this year on 12/10/25. yields to decrease This recent .25% cut to the and directly lowers Fed Funds has now reduced mortgage rates. the Fed Funds rate to 3.625%, When the Fed is a seller and with the target at 3.5% to 3.75%. The not a buyer of treasuries, the opposite Fed Funds only directly impacts on one happens with bond yields and mortgage consumer interest rate, the Prime Rate, rates rising. which fell to 6.75%. The Prime rate is
At each of the last two Fed rate cuts, 3% more than the highest target Fed from Powell caused less investment in The Fed Funds rate has an indirect US treasury bonds which caused bond impact on mortgage rates since moves yields to increase and mortgage rates by the Fed can influence trading in US to increase in step with bond yields. Treasury Bonds. Bond yields have a Mortgage rates are now very near to direct impact on mortgage rates. When where they were prior to the 9/17/25 bond yields increase, mortgage rates Fed rate cut, but still roughly 1% lower go up and vice versa. After each of the than they were this time last year. prior two Fed rate cuts, mortgage rates
If you want an easy way to see where increased after comments by Fed Chair mortgage rates are going, follow the Jerome Powell that spooked the bond
10 year treasury bond yield, currently market and caused less appetite for at 4.12%. When the 10 year bond yield treasury bonds, which increased bond falls below 4% and stays there for more yields and mortgage rates.
than a few days, we could be heading in the high 5% APR range on 30 year fixed We did not see an upward trend in mortgages. Since September of 2025, mortgage rates after the 12/10 rate cut the 10 year bond yield peeked below because the Fed also announced they
4% a half dozen times for a few hours would stop selling off treasuries from on those trading days and then went their balance sheet into the bond market back above 4%. and will instead start purchasing $40B/
The year over year Consumer Price Index, CPI, inflation reading from lower than anticipated at 2.7% compared to 3% this time last year. The markets were predicting this number to come in at 3% and the lower reading did help the bond market and lower mortgage rates slightly. The main component that caused CPI to beat market expectations was a big reduction in shelter costs. The shelter numbers are slower to decline and slower to increase. I am anticipating lower shelter costs to continue keeping inflation in check as we head into the new year.
APR range for 30 year fixed mortgages and may even fall into the high 5% APR range. Wishing you all a very prosperous and Happy New Year! If you are curious to see how you can use the current market conditions to your benefit, please reach out for a free consultation. Stay tuned here for future updates and feel free to reach out for a free consultation if you want to understand more about interest rates and mortgage products.
I am predicting a lower mortgage rate environment continuing into 2026, even though another January 2026 Fed rate cut is not guaranteed. With lower inflation and anemic jobs market, the Fed will be pressured into a January rate cut. Combined with the Fed buying $40B/month in treasuries, mortgage rates should stay in the current 6%