When will mortgage rates go down? The federal funds rate has decreased, but mortgage rates have increased.

Mortgage rates have edged higher on the week but remain below last year’s peaks: Freddie Mac on Dec. 11 showed the 30‑year fixed at 6.22% (up 3 bps weekly, down 38 bps YoY) and the 15‑year at 5.54% (up 10 bps weekly, down 30 bps YoY); the 10‑year Treasury opened at 4.13%, leaving the mortgage‑to‑Treasury spread at ~2.09% versus 2.35% a year ago. The Fed cut the funds rate by three 25‑bp moves in 2025 and signals only one cut in 2026, but mortgage pricing more closely tracks the 10‑year and has rebounded after earlier dips tied to rate‑cut expectations, making a sub‑6% 30‑year unlikely in the near term (MBA sees ~6.4% through 2026; Fannie Mae projects 5.9% by end‑2026). Tight housing supply and rising median prices (median single‑family roughly $410.8k by Q2 2025) mean affordability constraints persist—even if rates ease demand could surge—so investors should watch 10‑year yields and mortgage spreads for pressure on lender margins and for signals of renewed housing demand that could sustain prices.

Analysis

Freddie Mac data as of Dec. 11 show the 30-year fixed mortgage averaged 6.22% (up 3 bps week-over-week, down 38 bps year-over-year) and the 15-year averaged 5.54% (up 10 bps weekly, down 30 bps YoY), with 52-week ranges of 6.17%–7.04% for 30-year and 5.41%–6.27% for 15-year loans. The 10-year Treasury opened at 4.13% (versus 4.25% a year prior), yielding a current mortgage-to-Treasury spread of ~2.09% compared with 2.35% last year, which partly explains lower mortgage costs despite rates remaining above recent lows.

The Federal Reserve cut the fed funds rate three times in 2025 (three 25-bp moves) and signaled only one cut in 2026; mortgage rates, however, track the 10-year Treasury more closely and have rebounded after earlier pre-cut declines, making a durable sub-6% 30-year rate unlikely in the near term. Forecasts diverge—MBA sees ~6.4% through 2026 while Fannie Mae projects 5.9% by end-2026—so policy signaling and Treasury moves will be the key drivers.

Housing supply remains tight and median single-family sale prices rose to roughly $410,800 by Q2 2025, so affordability gains from modest rate improvements could be offset by renewed demand and price pressure. Investors should focus on 10-year yield trends, mortgage-to-Treasury spread dynamics, and regional price/supply indicators to assess valuation and margin risk in mortgage lenders, MBS, and housing-exposed equities.

Key Decisions for Investors

• Monitor 10-year Treasury yields and the mortgage-to-Treasury spread as primary signals for mortgage rate direction and for adjusting duration exposure in MBS and fixed-income portfolios,
• Maintain a cautious stance on long positions in mortgage lenders and homebuilder equities until there is a sustained decline in the 30-year mortgage below ~6% or clear evidence of easing housing supply,
• Hedge duration risk in mortgage-backed securities and related credit exposures given the potential for Treasury-driven rate rebounds despite Fed cuts,
• For real asset allocations, favor selective exposure to regions showing price stagnation or declines and prioritize assets resilient to affordability shocks (e.g., condos, shorter-duration cash flows) while monitoring Fed guidance and regional inventory data