Mortgage rates spent much of 2025 parked in the upper-6% range, held in place by persistent inflation pressures and a cautious Federal Reserve. That began to shift late in the year as the Fed signaled it was ready to ease policy. Rates slipped ahead of the September 2025 rate cut, the first of the year, and then drifted lower again before the October meeting before continuing their gradual decline as markets anticipated further action.

At the close of its in December meeting, the final one of the year, the Fed delivered another 25-basis-point cut, bringing the federal-funds rate down to a range of 3.50% to 3.75%. It’s the third consecutive meeting with a rate reduction and a clear sign that policymakers believe inflation is moving sustainably toward their target.

 

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