If you’ve been waiting for the “Red” to give the green light on lower mortgage payments, you might be scratching your head this week. On December 10, the Federal Reserve (often typoed as “Red” in hurried text messages!) announced a widely anticipated interest rate cut of 0.25%. Logic suggests that when the Fed cuts rates, your mortgage rate should drop too, right?
Not necessarily. In fact, following the decision, the market reaction has been surprisingly quiet.
Current Market Snapshot
According to a recent summary from HousingWire, mortgage rates have held steady following the Fed’s December rate cut, with 30-year fixed rates hovering near 6.3%.
Despite this being the latest in a string of cuts aimed at stimulating the economy, these policy changes have done little to immediately impact mortgage rates. On Monday, Mortgage News Daily reported that 30-year fixed rates averaged 6.29%, a marginal decline of just 7 basis points from the previous week.
The Role the Fed Has Played (and Will Play)
To understand why rates aren’t plummeting, we have to look at the specific role the Federal Reserve has played over the last few years.
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- The Past (The Inflation Fight): For much of 2022 and 2023, the Fed aggressively raised rates to cool down an overheating economy and fight inflation. This sent mortgage rates soaring from historic lows to the 7% range.
- The Present (The Pivot): Now that inflation has cooled, the Fed has pivoted to protecting the labor market. The December 10th cut was a move to support jobs and keep the economy humming.
- The “Priced In” Effect: Mortgage lenders are smart—they often adjust their rates before the Fed makes an announcement. The market had already expected this December cut, meaning the benefit was likely “priced in” to the 6.3% rate we saw weeks ago.
Why Rates Aren’t Dropping Further (Yet)
Policymakers have cited ongoing housing shortages and mixed jobs data as key reasons for their current strategy.
While the Fed controls short-term rates (like for credit cards or bank loans), mortgage rates track long-term bonds (specifically the 10-year Treasury yield). Right now, bond markets are taking a “wait-and-see” approach. Investors are unsure if the economy will slow down enough to justify more aggressive cuts, or if it will stay strong, keeping rates higher for longer.
What This Means for R3ES Clients
The “Red” tape of the Federal Reserve is complex, but the takeaway for homebuyers is simple: Volatility is flattening.
We are seeing a period of stability around the low-6% range. While we aren’t seeing the 3% rates of the pandemic era, we also aren’t seeing the volatility of last year. This stability allows buyers to budget with more confidence.
The Outlook
The Fed has signaled they are considering future cuts, but they will be data-dependent. If the job market weakens further in early 2026, we could see mortgage rates dip below 6%. However, if the economy remains robust, rates may stay in this 6.2%–6.5% channel for the near future.
Bottom Line: Don’t try to time the Fed. If you find a home you love and the monthly payment fits your budget at 6.3%, it is likely a good time to buy. You can always refinance later if the Fed decides to cut deeper in 2026.
Have questions about how these rates impact your buying power? Contact us today to run the numbers.