Today, the Federal Reserve cut rates — its third cut of the year.
The federal funds rate was lowered by a quarter point. Six of the 9 members of the Federal Reserve voted for the rate cut. Of the other three, one wanted a steeper cut while the other two felt that the cut wasn’t warranted.
In making its decision, the Fed typically weighs its dual mission of keeping rates high enough to control inflation while keeping them low enough to keep the nation’s economy strong. In this case, the cut was made in response to the nation’s cooling labor market, with unemployment up 0.3% during the third quarter of 2025.
Note that the Fed does not control mortgage rates nor does today’s rate cut apply to home mortgages. However, the federal funds rate does have a strong impact on mortgage rates and lowering rates typically does lower borrowing costs for homeowner. According to the Federal Reserve Bank of St. Louis, the average 30-year fixed mortgage rate was 6.19% last week – down from 6.26% in the prior week, and down from early October’s rate 6.34%. New weekly averages will be published on Dec 11th.
In our view, this is good news. We believe that any dip of 30-year mortgage rates below 6% will likely generate a new wave of homebuyers. A high-5% rate, in our view, should be sufficient to “unlock” existing homeowners currently holding 3-4% mortgages, prompting them to sell and buy. Although the current rate remains well above those legacy rates, we believe that it’s “close enough” to allow homeowners to move without incurring a dramatic increase in interest costs.
