3 costly mortgage mistakes to avoid after a December Fed rate cut

Mortgage interest rates may still drop this year.

Following two Federal Reserve interest rate cuts that caused mortgage rates to fall to multiple 3-year lows, the central bank is poised to cut rates again when it meets on December 10. That, in turn, could cause mortgage rates to fall again. And it may even happen pre-emptively, as the last two big mortgage rate drops actually occurred in the hours preceding a Fed rate cut announcement.

This is great news for homebuyers, who already have multiple ways to secure a mortgage rate under 6% now. And they could have even more after next week. Still, homebuying and mortgage rate shopping should always be done judiciously, especially in today's changing rate climate. While that means making the right, timely moves now, it also extends to avoiding some costly mortgage mistakes. So, which errors should you specifically do your best to avoid after a December Fed rate cut? Below, we'll break down three worth thinking through right now.

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3 costly mortgage mistakes to avoid after a December Fed rate cut

To better exploit this cooling in the mortgage interest rate environment, borrowers should specifically avoid making these mistakes after a December Fed rate reduction is formalized:

Assuming all lenders will respond the same way

A 25 basis point Fed rate cut, widely expected in that amount next week, doesn't mean that mortgage interest rates will respond by falling by the same amount. In fact, different lenders will respond to the news in their own, unique ways. Some may have already priced in this reduction into their offers this week, hence the reason why you may see little change in the rates listed online next week. 

Others, however, may keep rates steady, while some may be willing to make more significant reductions in what they offer qualified borrowers. It won't be a uniform response, so don't assume that it will be. Instead, start shopping for mortgage rates and lenders now so you know which ones are likely to have the best deals once a rate cut is complete.

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Waiting for further rate cuts in 2026 to act

Predicting the long-term likelihood of interest rate cuts is impossible to do with precision. Any number of known and unknown factors could easily change that trajectory, so waiting for further rate cuts in 2026 to justify acting is a risky decision. Instead, if you can afford today's sub-6% average rates, consider locking one in. You can always refinance should rates materially drop in the future. In the interim, you'll be protected against any adverse conditions that cause rates to rise again. 

Additionally, even if rates were to be cut further in 2026, the impact on the mortgage rate climate isn't known. But it could complicate the homebuying process with more buyers for limited inventory in the middle of the traditional spring homebuying season. Waiting for that likely scenario to play out, then, should be avoided if you can afford to move now.

Not reviewing 15-year options

When was the last time you looked at the average mortgage interest rate for a 15-year term? Yes, this will likely mean bigger monthly payments thanks to the expedited timeline. But it could also mean saving significant sums of money and becoming debt-free much more quickly. 

And with the average 15-year rate now just 5.37%, and the potential for it to fall further later this month, it would be a mistake to dismiss this shorter mortgage term completely out of hand. It won't be the right choice for many homebuyers, but it's worth crunching the numbers to see where you land. You may be surprised at what you ultimately discover.

The bottom line

It's been a long time since homebuyers could take advantage of a Fed rate cut, let alone multiple ones in recent months. So it's critical that these borrowers use this moment in time strategically. By avoiding the assumption that all mortgage lenders will respond to a rate cut in the same way, acting now (if affordable) instead of waiting for unknown rate cuts in 2026 and reviewing 15-year terms in addition to 30-year ones, buyers can better position themselves for success. And that doesn't just mean a low rate now, it means significant savings over decades, so it's important to make the right moves (and avoid costly mistakes) as best as possible this month.