I was just thinking about the housing market as we are about to
head into the Fed’s upcoming December 2025 meeting. Financial markets and many analysts expect the Fed to lower its benchmark short-term interest rate by another 25 basis points, but I'm not expecting this to lower mortgage rates and here's why.
The Fed controls short-term rates, which affect things like credit cards, auto loans, and bank lending benchmarks. Meanwhile, mortgage rates are driven by long-term forces primarily long-term bond yields. The likely December cut appears already “priced in” to current mortgage rate expectations, meaning the market has largely anticipated the move and adjusted accordingly.
Even without a fresh Fed decision, mortgage rates have seen some downward movement in recent months. The 30-year fixed mortgage rates have been hovering around ~6.2–6.3%. That’s a notable drop from some of the peaks earlier in 2025, though still well above the historically low rates seen earlier in the decade. If inflation remains stickier than expected or if the bond market turns cautious again the rates we reverse.
If you’re looking to buy or refinance: The current environment could be a reasonable window since rates are somewhat lower than earlier in 2025, and even a modest drop could make a meaningful difference in monthly payments. However I tink I'm holding off looking for investment properties until we see meaningful drops in rates or houseing prices. It's never great to time a market, but timing still matters. I'm having a difficult time getting m market movement trends correct based on inflation trends, treasury yields, and investor sentiment since it seems to be widening it's correlation to the actual economy. I talked about the in another post and my personal trading startegy is still not wokring out as my bias for a market the refelect the economy is a thing of the past.
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My wife and I have been talking about downsizing our house for a while now. The market has been pretty sparse though. We would love to build, but the cost to do that is inflated 3x more than buying something off the market.
My home is mortgage free but I know friends and colleges that are still under the burden of huge mortgages. My Canadian banks made a pretty good profit again this year but I wouldn't expect them to pass the rate reduction to mortgage holders. I'm currently offered a pittance of 1.8% on my 30 to 365 day GICs for my Emergency Reserve cash.
While a rate cut might be beneficial to business, I'm not looking forward to the higher Inflation.