Will mortgage interest rates drop after this week's Fed meeting?

The Federal Reserve is set to meet for the final time in 2025 this week and optimism over another interest rate cut is surging. The chances of a cut at the conclusion of the central bank's meeting on December 10 are now around 90%, according to the CME Group's FedWatch tool. That will bring the federal funds rate down to a range between 3.50% to 3.75% and, more importantly, potentially lower the interest rate costs for millions of borrowers.

This movement is especially highly anticipated by homebuyers, many of whom have been contending with elevated mortgage interest rates following the pandemic but who have seen small but material relief in the cooler rate climate of 2025. For these borrowers and owners hoping to refinance out of their current high mortgage rates, movement at this week's Fed meeting is especially important. Even small reductions here can translate into meaningful savings for homeowners when spread out over 15-year and 30-year mortgage terms.

So what are the chances of another mortgage interest drop, exactly, after this week's Fed meeting? While predicting the future rate movement of any borrowing product is inherently difficult to do, there are some factors to consider now that can better inform borrowers' next moves. Below, we'll break down three to know this week, specifically.

Start by seeing how low your current mortgage rate offers are here.

Will mortgage interest rates drop after this week's Fed meeting?

The answer to this question comes down to two unsatisfying words: It depends. That's because the Fed's rate actions and the responses from mortgage lenders don't always align neatly or identically. Here are three items to consider that can better inform your understanding this week:

Lenders may have already "priced in" this week's cut

Mortgage lenders do not need to wait for the central bank to formally issue an interest rate reduction to preemptively lower theirs. And many lenders may have already taken this approach, "pricing in" this week's anticipated cut into their current offers. This is why the rates you see listed on online marketplaces today, for qualified borrowers, may be pretty much the same as what you see at the end of the week. 

With the chances of a rate cut so high, lenders can feel comfortable getting ahead of this activity with their offers now. But each lender has their own unique approach, so it pays to shop around to see what's actually available right now. By doing so, you'll establish a baseline to compare against once the cut is actually issued.

Compare mortgage rates, terms and lenders here now.

The last two big mortgage rate drops happened before the Fed cut rates

The average mortgage interest rate fell to a 3-year low in September, hours before the Fed's rate cut that month was announced. And the same dynamic occurred in October, just before the second cut of the year was made official. So, waiting to act only after the Fed's rate cut is formalized could be a costly mistake. 

Instead, for this week at least, buyers should take a flexible approach and be ready and capable to lock in a low rate when it materializes, even if that means acting the morning of the Fed meeting or in the hours right after. Rates here are fluid and will be especially so as the market responds to the Fed's actions and comments, so it will behoove borrowers to be prepared and informed more so than usual this week. Be ready to watch the market daily.

Comments made after the cut is announced can potentially cause rates to change further

Sure, many lenders may have already priced in this week's Fed rate cut. But what they have not priced in, simply because they're unknown at this point, are the comments from Federal Reserve Chairman Jerome Powell about the future of additional interest rate cuts in 2026. Those comments, made during the traditional news conference following the Fed's meeting, have the potential to shake the rate climate further. And that could cause rates to decline lower or even result in them rising, should they be less aggressive and favorable for borrowers. So it's worth paying close attention then, too.

The bottom line

Mortgage interest rates can potentially fall further this week, timed to an expected Fed rate cut. But some lenders may have already lowered their rates in anticipation of such a move. And rates here will be somewhat fluid, and they can fall even before an official cut is announced, as they did the last two times this occurred. They could also move again during and after the Fed's final press conference of the year. So there's a lot to monitor this week, and buyers will need to be strategic and rapid in their responses. The good news, however, is that by being flexible and judicious now, buyers will be able to potentially secure something that's largely been unavailable in recent years: an affordable mortgage interest rate.