The central bank move may not lower mortgage rates, but it could convince some buyers off the sidelines as 2026 looms
Mortgage market watchers and industry professionals know well that a Federal Reserve interest rate cut doesn’t necessarily move the needle for mortgage rates – especially if financial markets had already expected the decision.
But the central bank’s latest cut is still good news for homeowners and hopeful buyers, mortgage brokers say, as a sign that broader borrowing costs are on the way down and inflation concerns are largely in check.
That means while Wednesday’s 25-basis-point cut by the Fed might not budge mortgage rates, it could still be an important step in persuading some buyers who had been holding off on a purchase to step back into the market.
“A cut, or even the anticipation of one, absolutely boosts buyer confidence,” Samantha Shelton (pictured, top left), mortgage broker and president at Align Lending, told Mortgage Professional America. “Buyers are emotional and the Fed’s direction impacts the way they feel about the market just as much as anything else.
“Even though mortgage rates don’t move in lockstep with the Fed, a cut signals something powerful – inflation easing and economic stability returning. That alone brings people off the sidelines.”
‘People don’t need rates to collapse’
The 10-year Treasury yield, one of the biggest single influences on 30-year fixed US mortgage rates, has been on a steady climb over the past week – although it remains well below its midsummer level.
But mortgage rates last week sat at their lowest level for over a month, according to Freddie Mac, and Greenside Capital president Kurt Brandly (pictured, top right) told MPA the new Fed cut is potentially more important for buyers than week-to-week rate fluctuations.
Another Fed rate cut is widely anticipated, yet mortgage rates near one-year lows suggest the move is already priced in.https://t.co/E5x7VFQR8B
— Mortgage Professional America Magazine (@MPAMagazineUS) December 4, 2025
“When people hear, ‘the Fed is cutting,’ the takeaway is that financial conditions are easing and the worst of the rate pressure may be behind us,” he said. “Even if mortgage rates only move slightly, confidence improves simply because buyers feel a sense of momentum and stability.
“People don’t need rates to collapse. They just need to feel like things are trending in the right direction. That psychological shift can bring more buyers back into the market or help people with homes use equity to pay off bad debts.”
After leaving its funds rate unchanged until mid-September, the Fed has now cut rates three times in its last three decisions, meaning that benchmark will end the year 75 basis points lower than where it began.
And some observers believe further reductions could be on the way in 2026, even if the Fed is likely to move cautiously amid lingering fears about trade turmoil, the labor market and inflation risks.
Fed cut rumors spur some hopeful buyers into action
Economic uncertainty and affordability challenges have kept plenty of potential homebuyers sidelined since the start of the year, but both Shelton and Brandly said recent weeks have seen an uptick in clients inquiring about their options as rumors of a Fed cut strengthened.
“Any time the Federal Reserve approaches a rate decision, client questions spike,” Shelton said. “Buyers are watching closely because they assume the Fed’s move will immediately shift mortgage rates, so there’s always a wave of confusion and anticipation.
“Right now, most clients want to know whether they should pause, wait, or take action ahead of a possible shift in the rate environment.”
A key focus for brokers in the buildup to Fed decisions, she added, is educating borrowers on what actually shifts mortgage rates including inflation data, bond yields, and market expectations.
That’s equally the case for Brandly. “What the Fed does influence is the broader economic outlook,” he said. “If the Fed signals that it’s comfortable with the direction of inflation or believes the economy is slowing, that can move bond yields lower.
“So a lot of the conversations I’m having are about expectations – helping clients separate the headlines from what actually drives rate movement and shifting the conversation back to the client’s goals at that time, not trying to time the market.”
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
