Key Insights

• Indirect Link to Mortgage Rates: The federal funds rate affects short-term borrowing costs, while long-term fixed mortgage rates are more closely tied to the 10-year Treasury yield and investor expectations of future inflation and economic growth. The recent cut was widely expected and already “priced into” the market, so significant drops in mortgage rates are not anticipated in the immediate future.
• Affordability Challenges Remain: Despite recent easing, average 30-year fixed mortgage rates are still in the 6% range (averaging around 6.19% as of early December 2025). Combined with high home prices, this keeps affordability a major concern for many potential buyers.
• Supply Shortage is the Core Problem: A primary reason for limited relief is the persistent lack of housing supply. Many existing homeowners are reluctant to sell because they are locked into ultra-low mortgage rates from previous years and would face a much higher rate if they moved. The Fed’s cuts do not address this inventory issue.
• Increased Demand Might Offset Savings: If lower rates do eventually materialize in the mortgage market, they will likely bring more buyers into the market, which could increase competition and push home prices even higher, offsetting any potential savings from a lower rate. 

Financial Overview