"Mortgage Rates Plunge to 1-Year Low as Fed Cuts Rates, Boosting Refinance Demand"

Mortgage rates in the United States have reached their lowest level in over a year, signaling a potential shift in the housing market dynamics. According to Freddie Mac, , a decline of 2 basis points from the previous month. The 15-year fixed-rate mortgage, however, . Year-over-year, both rates have dropped significantly, . These changes reflect broader trends in the financial landscape, including [the 10-year Treasury yield, , .

Impact on Housing Activity

The decline in mortgage rates has begun to influence housing market activity. Mortgage application volumes have increased, driven primarily by adjustable-rate mortgages and refinancing applications. Additionally, , although new home sales data for the same period remains unavailable due to a government shutdown. These trends suggest that lower borrowing costs are stimulating demand, albeit with some structural challenges persisting in the housing supply chain.

Federal Reserve's Rate Cut and Housing Outlook

The Federal Reserve's decision to cut short-term interest rates by 25 basis points on December 10, 2025, has added another layer to the evolving economic environment. This cut, the third of the year, , a neutral territory according to Fed Chair . Despite this adjustment, the central bank has indicated a cautious approach for 2026, with officials divided on the necessity for further rate reductions. [Powell emphasized that the housing market remains a critical concern](https://example.com/2), noting that structural shortages and the lingering effects of historically low pandemic-era mortgage rates are dampening mobility.

Refinancing Opportunities and Affordability

The Federal Reserve's rate cuts have created opportunities for homeowners to refinance their mortgages. . For example, . While mortgage rates are expected to remain stable in 2026, affordability is projected to improve if home price growth remains subdued and incomes continue to rise. [Realtor.com's chief economist, Danielle Hale, , the first time this figure has dropped below 30% since 2022.