Have Fed rate cuts already been priced into mortgage rates?

"Last week, mortgage rates hit a new low for 2025, as the labor market proved more critical to the bond market than inflation. The big question is: what will happen after the Fed cuts rates this week? Last year at this time, mortgage rates hit a yearly low of nearly 6% and the Fed cut rates only to see mortgage rates shoot back up to 7.25%. Will this happen again? Let's dive into the answer with our weekend Housing Market Tracker data."

"In my 2025 forecast, I anticipated the following ranges: Mortgage rates between 5.75% and 7.25% The 10-year yield fluctuating between 3.80% and 4.70% So far in 2025, the 10-year yield has stayed in my range most of the time. If I account for some wild after-hours trading, the range has been between 4.79% 3.87% this year, with most of the year being below 4.70%. We briefly dipped below 4% last week."

"This dynamic helps explain why mortgage rates reached a yearly low last week, despite inflation concerns. This podcast talks about the impact of tariffs, while this one is on jobless claims data. Clearly, the labor market has dominated in 2025, pushing rates down even with inflation above targets, trillions in debt that need to be issued and the Fed maintaining a modestly restrictive stance."

Forecasted mortgage rates are expected between 5.75% and 7.25%, with the 10-year Treasury anticipated to fluctuate roughly between 3.80% and 4.70%. In 2025 the 10-year mostly remained within that band, briefly dipping below 4.0% and trading between about 3.87% and 4.79% including after-hours action. Robust labor-market data has been the dominant force pushing bond and mortgage rates lower even as inflation remains above target, large debt issuance looms and the Federal Reserve keeps a modestly restrictive stance. Prior-year behavior showed yields rising after a Fed cut when economic data improved.

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