Here's what a $650,000 mortgage loan costs monthly after the December Fed rate cut

Mortgage rates have been on a downward trajectory since the Federal Reserve began cutting rates in September of this year, offering some much-needed relief to homebuyers who've had to weather years of elevated borrowing costs. And, the central bank's third rate cut of the year, announced earlier in December, only continued this trend. The December rate cut brought the federal funds rate down to a range of 3.50% to 3.75%, the lowest level it's seen since early 2022. 

While the Fed's benchmark rate doesn't directly set mortgage rates, it creates ripple effects throughout the lending market that ultimately influence what homebuyers pay. And, those ripple effects are now showing up in meaningful ways. After the December Fed rate cut, the average 30-year mortgage rate is now sitting at 6.12%, a significant improvement from the 7%-plus rates that were available in early 2025. For borrowers financing larger home purchases in competitive markets, these rate declines translate into real monthly savings. 

That's particularly true if you're considering a hefty mortgage, like a $650,000 mortgage loan, which is a common loan amount in many metropolitan areas where home prices remain elevated. And, understanding what you'll actually pay each month in this new rate environment is essential for timing your purchase decision.

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How much does a $650,000 mortgage cost each month after the December Fed rate cut?

Today's average mortgage rates sit at 6.12% for a 30-year fixed mortgage and 5.37% for a 15-year fixed mortgage. These rates represent substantial improvement from where they stood at the start of the year, when 30-year mortgages averaged 7.04% and 15-year loans hit 6.27%. For a $650,000 loan amount, the monthly principal and interest payment difference is considerable. At today's rates, here's what you'd pay each month:

• 30-year mortgage at 6.12%: Your monthly payments would be $3,947.37.
• 15-year mortgage at 5.37%: Your monthly payments would be $5,266.31.

Now let's compare those figures to what borrowers faced back in January 2025, when the average mortgage rates were significantly higher. At the start of the year, monthly payments on that same $650,000 mortgage would have been:

• 30-year mortgage at 7.04%: Your monthly payments would have been $4,341.94.
• 15-year mortgage at 6.27%: Your monthly payments would have been $5,580.34.

By simply by locking in today's lower rates, borrowers could see savings of nearly $395 per month, or about $4,735 annually, on a 30-year mortgage compared to January. Borrowers opting for 15-year mortgages save about $314 each month, which adds up to approximately $3,768 per year.

Now let's compare today's costs to what they would have been at last summer's rates. In August 2024, when the 30-year mortgage rate averaged 6.53% and the 15-year rate sat at 5.92%, the monthly payments would have been:

• 30-year mortgage at 6.53%: Your monthly payments would have been $4,121.27.
• 15-year mortgage at 5.92%: Your monthly payments would have been $5,457.02.

That means today's borrowers save about $174 per month compared to last August's rates on a 30-year mortgage loan, which translates to roughly $2,088 annually. On a 15-year mortgage, the savings come to about $191 monthly or approximately $2,289 per year. 

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Should you lock in a mortgage rate now or wait for 2026?

With the Fed signaling the possibility of further policy easing in 2026, many buyers are hoping to secure an even lower mortgage rate by waiting for the new year to roll around. But waiting for rates to fall further isn't always the best strategy. After all, mortgage rates have already pulled back meaningfully, and much of the market's expected easing may already be priced in, so there may not be much to gain by waiting.

Home prices also remain elevated in a lot of competitive markets across the nation due to low inventory. And, prices tend to climb when inventory is limited and buyer demand increases. What that means is that even if rates fall modestly in 2026, there could be even more competition for the limited for-sale inventory, resulting in higher purchase prices that could wipe out any monthly savings.

That said, there's still the potential for incremental declines to occur over time. If inflation cools faster than expected, for example, mortgage rates could trend even lower. Given the variables, it could make sense to lock in now with a float-down mortgage rate option, which lets you capture a lower rate if the market shifts before closing. This tends to provide the best of both worlds: protection from rising rates and flexibility to benefit from falling ones.

The bottom line

A $650,000 mortgage can place substantial weight on any budget, but today's rates make that monthly obligation considerably more manageable than it would have been earlier this year. Borrowers locking in rates now can expect to save significant amounts each month compared to the higher-rate environment from the first part of the year. Whether we'll see additional rate cuts in 2026 remains an open question, though, with Fed officials signaling caution. So for homebuyers who've been waiting for the right moment to enter the market, the current rate environment offers a tangible improvement, even if the path forward remains uncertain.