What the Fed’s Dec. 9-10 meeting could mean for homebuyers and refinancers

With another Fed cut likely next week, should home buyers and refinancers wait another week to lock their new rates?

Not necessarily. While the Fed’s actions set the context for rates across the economy, the Fed doesn’t set mortgage rates directly.

In fact, some Fed cuts cause a slight increase in mortgage rates, at least for a while.

Another rate cut would be the Fed’s third in a row

If the Federal Reserve cuts its benchmark rate, as expected, during its Dec. 9-10 meetings, it would mark the third consecutive cut in a row. The Fed reduced its benchmark rate by 0.25 percent in both September and October.

After the October cut, Fed Chair Jerome Powell said a third consecutive cut in December was “not a foregone conclusion.” But this month, a survey of 100 leading economists conducted by Reuters showed analysts expect another 0.25 percent reduction to the benchmark rate when the Fed meets Dec. 9-10.

Along with weighing economic factors, the Fed also faces political pressure from the Trump Administration to lower borrowing rates.

The connection between the Fed’s rate and mortgage rates

Reductions in the Federal Funds Rate lower the cost of borrowing for short-term loans and consumer credit, but fixed mortgage rates are more complex. They’re tied more directly to long-term interest rates like the yields on 10-year Treasury bonds.

Sometimes, the economic changes sparked by a Fed rate cut can lower demand for Treasury bonds, increasing the yield on these bonds. This can increase rates on 30-year fixed-rate loans.

For instance, after the Fed’s last rate cut, in late October, average mortgage rates drifted up for three weeks before reversing course and entering two weeks of consecutive declines this week.

How another Fed cut can affect home buyers

Buyers who lock in rates on a new 30-year loan keep that rate for up to 30 years. No one can control what average rates are at the time of their rate lock, but they do have some say over when to lock the rate.

So some borrowers put off locking their rate, hoping rates will fall some more next week or the week after. It’s easy to understand why. Reducing a rate by 0.5 percent, for example, from 6.75 to 6.25 percent, on a $400,000 loan could save $47,350 over the life of the loan.

But these savings would happen only if the borrower keeps the home all 30 years and follows the payment schedule the entire time. Most home buyers don’t do this. They refinance or sell the home within 10 years.

Some other effects of a rate reduction are more real. For example, lowering a rate to 6.25 percent, from 6.75, could trim about $130 a month from the mortgage payment on a $400,000 loan. This could create monthly savings — or it could help borrowers afford a bigger loan at the same monthly payment.

What another rate cut means for refinancing homeowners

Some homeowners who want to refinance their existing mortgages may wait weeks, or months, for rates to fall before locking in a new rate.

Since these borrowers already own their home, they don’t have to worry about timing the mortgage transaction with the end of their lease agreement or lining up a closing day with the sale of another property.

These borrowers can watch news reports about Fed meetings for months, contemplating whether to lock in this week or next week. Of course, waiting can also mean losing out on low rates.

Average rates have already fallen almost 0.75 percent since January, creating the potential for a lot of savings for refinancers. In today’s volatile economy, there’s no guarantee that trend will continue.

So, should borrowers act now or wait a few more weeks?

Whether to lock in at today’s rates or wait for a lower rate depends, mostly, on the borrower’s unique situation:

• For a home buyer who needs to move into the new home on closing day, it’s usually an easy call: They need to stay on track to close the loan so they can move in. Waiting to shave another few dollars off their monthly payment could mean losing the opportunity to buy the home.
• For a homeowner who has no important deadline but is casually interested in refinancing to save money, waiting for the Dec. 9-10 Fed meeting, or waiting for the Fed’s first meeting of 2026, may or may not create savings. It’s up to the borrower to decide.

Most borrowers fall somewhere in between these two extremes and should make the call based on their own needs, working with their loan officer to make the best decision.

There’s more to saving than waiting for the Fed

Articles like this one about mortgage rates tend to discuss average mortgage rates. Average rates shape the conversation about mortgage costs, but few borrowers get average rates. Instead, they get a rate that’s higher or lower: a rate that’s customized to their home, their personal finances, and their loan type.

This means there are more ways to save on mortgage costs than waiting for the Federal Reserve and hoping its decisions translate into lower mortgage rates.

Borrowers can also:

– Pick the right loan type: A loan type that matches the borrower’s financial profile can save on loan costs. For instance, someone who struggles to qualify for a conventional loan may be able to save by getting approved for an FHA loan instead, depending on their unique financial profile.
– Put more money down: Bigger down payments create smaller mortgage loans and smaller monthly payments for the same home.
– Buy discount points: Buyers and refinancers can also buy themselves a lower mortgage rate through discount points. This works best for people who plan to stay in the loan for several years or more since it takes time for a lower rate to pay off.
– Shop around: Different lenders offer different rates, but they also charge different upfront fees. Shopping around to see what else is out there can lead to savings. Better’s all-online loan process makes it easier to get a loan offer to compare with others.

Borrowers who do what they can to lower their own rate tend to benefit even more when average rates fall.

A pre-approval can put your home buying picture in focus

The Federal Reserve’s decisions are key to the global economy and to average mortgage rates, but many other variables also help shape the rate a new homebuyer or refinancing homeowner will get.

To see how all your unique variables can work together to create your rate, try getting a mortgage pre-approval.

Better’s all-online pre-approval process requires only a soft credit check, so it shouldn’t affect your credit score.

...in as little as 3 minutes – no credit impact

This article is for educational purposes and is not intended as financial advice. All loans are subject to underwriting approval.