Lenders weigh a familiar cut against stubborn inflation and fragile housing demand
In its latest move, the Federal Reserve cut the federal funds rate by another 25 basis points, deepening a rate‑cutting cycle that mortgage executives said has offered relief at the margins but not a quick cure for a strained housing market.
“The Fed’s decision to cut rates for the third time this year reinforces the overall strength of the economy which fosters a supportive environment for mortgages and refinance activity,” said Joseph Panebianco, CEO and president of AnnieMac Mortgage.
“In the final weeks of 2026, it is critical that lenders continue to monitor reporting and data, including employment, interest rates, and inflation, to make informed decisions heading into the new year.”
Market reaction and mortgage demand
For Keller Williams chief economist Ruben Gonzalez, the immediate market impact has less to do with the move itself than the Fed’s guidance.
“For now, markets and mortgage rates are more reactive to language around future decisions from the Fed than to this week’s change, which was largely a foregone conclusion,” he said.
Gonzalez said “the cost of borrowing has continued to constrain home buyers, thinning markets in the South and West,” while inventory has climbed and “several major markets had falling median home prices.”
He added that “weakening labor markets” are likely depressing purchase demand, with 2026 shaping up as “a transitionary year as mortgage rates fall below the previous year’s level” and inventories staying relatively high.
Meanwhile, Melissa Cohn, regional vice president at William Raveis Mortgage, said the latest move has been “no surprise,” and markets “took it in stride.”
But, she warned, “without a clear picture of the economy’s health, it’s tough to say” what it means for mortgage rates, which “will be determined as new data on jobs and inflation get released.”
How durable is this cutting cycle?
Ryan Sweet, chief global economist at Oxford Economics, said the 25‑basis‑point move “sets the Fed up for an extended pause,” arguing the cut looks like “an insurance cut.”
He warned there is “a non-trivial risk that the central bank is misreading the economic tea leaves as it’s data-dependent rather than forward-looking.”
Mike Fratantoni, MBA senior vice president and chief economist, said the decision highlights “just how divided the Committee is with respect to future rate cuts,” noting inflation remains elevated even as the job market appeared to soften.
He added that MBA expects mortgage rates to stay in a “fairly narrow range” as the Fed nears the end of its cutting cycle next year.
Refinance prospects and the 2026 playbook for lenders
Some lenders already positioned for a refinancing uptick. “Loan Factory has rate alerts set up for 24,000 clients, and many of them are waiting to refinance. When the Fed cuts rates, we expect a large number of these clients to move forward with refinancing,” Thuan Nguyen, CEO of Loan Factory, said.
Others see the cut mainly as a relationship moment. “It gives a great opportunity to re‑engage with clients to let them know we are still in a downward rate environment which instilled more confidence in homebuying and/or refinancing an existing loan for better terms,” Brian Cooke, president and CEO of World Home Loans, said.
He warned that “further weakening of the economy and tame inflation” would still be necessary for mortgage rates to move meaningfully lower.
Recent averages around the mid‑6% range for 30‑year fixed mortgages and findings from a LendingTree study suggesting some refinancers could save “$50,000 or more” depended heavily on borrower profiles and rate scenarios and should be treated as indicative rather than universal benchmarks.
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