"October's government shutdown throttled the flow of data from federal agencies, making it tough to gauge the economy's health. Neither October nor December's Federal Reserve rate cuts were sure bets, since the central bankers rely on that data, too. Right now, markets think the central bankers will probably maintain current rates at their next meeting Jan. 27-28. But that's a "probably," not a "definitely.""
"Though the Federal Reserve doesn't directly set mortgage rates, expectations around the Fed's decisions often set the tone for markets. Pretend it's a party: Markets (and mortgage lenders) are constantly reading the room and making adjustments based on the vibes. The Fed, on the other hand, arrives fashionably late, using reams of data to make decisions that are announced roughly every six weeks."
"The uncertainty around 2025's last few Fed meetings made it harder for mortgage lenders to set rates with confidence. If we stick with a party metaphor, this period was the equivalent of pretending to check your phone to try and look busy - it's better than admitting you're not sure what to do. On one hand, 2025 ended with average rates on 30-year, fixed-rate mortgages staying within a fairly limited range in the low six percents."
A near-term Fed rate cut looks unlikely as disrupted government data flow weakened policymakers' information. Markets currently price a high probability that the Fed will maintain rates at the Jan. 27-28 meeting, though that expectation is not certain. Market expectations influence mortgage pricing even though the Fed does not directly set mortgage rates. Lenders have been cautious because uncertainty from recent Fed meetings made rate-setting harder. Average advertised 30-year fixed mortgage rates ended 2025 in a narrow band in the low six percent range. Freddie Mac's weekly survey showed only a 19-basis-point spread between its high and low readings.
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