Housing News
The Fed Dropped Rates. Will Stubborn Mortgage Rates Now Fall Below 6%?
October 29, 2025
The U.S. Federal Reserve dropped its interest rates by 0.25%, marking the second, long-awaited cut of the year.
Many homebuyers and homeowners are hopeful this quarter-point cut will finally bring mortgage interest rates meaningfully down. Mortgage rates have been bouncing around in the low 6% range since early September, according to Freddie Mac data.
Mortgage rates are separate from the Fed’s funds rate. But they are generally influenced by the Fed’s moves. So, if investors believe the Fed is likely to lower rates, mortgage rates typically come down.
“Overall lower rates will always be helpful to the economy and in support of housing affordability,” said New American Funding Chief Investment Officer Jason Obradovich.
Rates under 6% could spur more priced-out buyers to re-enter the market. It could also set off a refinance boom from people who bought a home in the last few years when rates were higher.
However, there’s no guarantee that mortgage rates will continue to fall further.
“Mortgage rates have moved down notably in advance of the Fed’s meeting, hitting their lowest level in more than a year,” said Realtor.com Chief Economist Danielle Hale in a statement. “Further declines will depend on new developments.”
“The Fed’s decisions are anticipated by the market, which means that the upcoming rate cut and several more over the next few months are already largely priced in,” said Hale.
Even if rates remain above 6%, small changes can add up to significant savings over time.
Lower rates can make the monthly payments on the same home cheaper. They can also boost a homebuyer’s buying power.
Existing homeowners may be able to refinance their loans to take advantage of the lower rates as well. This may save them money each month on their loans. Over the length of a 30-year, fixed-rate loan, those savings may be substantial.
While the Fed’s benchmark rate and mortgage rates don’t always move in tandem, interest rates for adjustable-rate mortgages (ARMs) and Home Equity Lines of Credit (HELOCs) are expected to come down after the Fed cut rates.
An ARM can make the first few years of homeownership more affordable. These loans typically offer a lower mortgage rate for the initial five, seven, or 10 years than those available on traditional 30-year loans. Then the rate adjusts, up to a cap, every six months to a year afterward. The new rates are based on market rates, so they could go up or down.
HELOCs give homeowners access to their home equity. These loans are similar to credit cards. The borrower can take out as little or much as they like up to a certain limit, during the draw period. Then they pay it back, only paying interest on the amount they use.
“With mortgage rates already hovering just above three-year lows, even a modest dip could further enhance affordability and stoke housing demand,” said First American Senior Economist Sam Williamson in a statement.
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