On December 10, 2025, the Federal Reserve announced another 0.25% rate cut, lowering the federal funds rate as part of its ongoing effort to support a cooling economy. Naturally, many buyers and homeowners immediately wondered whether this move would lead to lower mortgage rates — but the connection isn’t as direct as it may seem.
Mortgage rates do not move in lockstep with Fed rate cuts. Instead, long-term home loan rates are driven primarily by inflation expectations, investor sentiment, and the 10-year Treasury yield. By the time the Fed makes an official announcement, markets have usually priced in expectations, which is why mortgage rates don’t always fall immediately afterward.
In fact, leading up to this rate cut, many lenders had already adjusted pricing based on the belief that the Fed would continue easing policy. As a result, mortgage rates were already trending slightly lower — but not dramatically.
The Fed’s decision may still influence rates indirectly over the coming months. If investors believe the cut signals softer inflation and a more stable economic outlook, the 10-year Treasury yield may drift downward, allowing lenders to offer more competitive mortgage rates.
For buyers and homeowners, the takeaway is simple: the Fed’s move may help — but expect gradual, not sudden, changes. Monitoring the bond market will give the best clues about where mortgage rates go next.