Will mortgage interest rates drop this December? Everything to consider now

A recent decline in mortgage interest rates could continue in the final month of the year.

Andrii Yalanskyi/Getty Images

December 10, 2025. That’s the date when the final Federal Reserve meeting will conclude its final 2025 meeting and, with it, a now widely anticipated reduction to the federal funds rate. A rate drop to a range between 3.50% to 3.75% will be welcome for a wide swath of borrowers, but arguably most so for homebuyers and owners looking to refinance. While mortgage interest rates have been declining for much of this year (they fell to 3-year lows multiple times in recent months), they’re still substantially higher than they were at the start of the decade. So any Fed rate cut and resulting drop in mortgage interest rates will be helpful.

But is that likely to happen this month? And how much lower will rates likely fall from where they are now, on December 1? Perhaps most importantly, should buyers consider taking action now or should they wait until December 11 or later, at which point they may find themselves having to lock a rate directly during the height of the holiday season? Below, we’ll break down the answers to these questions and detail what’s worth considering now, ahead of the next potential mortgage interest rate drop.

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

Will mortgage interest rates drop this December? Everything to consider now

The chances of a Fed rate cut next week are high, as of December 1, according to the CME Group’s FedWatch tool. Now at around 87%, the likelihood of a reduction has surged in recent weeks, largely due to an increase in the unemployment rate, according to the most recent report. Working off a less clear economic picture than the central bank would normally have, thanks to the lingering impacts of the government shutdown, the unemployment report could be enough justification for the Fed to cut rates.

How that will impact mortgage interest rates this month, however, is less clear. As of December 1, the average mortgage interest rate for a 30-year term is 5.99% and 5.37% for a 15-year term. Rates could fall further toward 5% this month, but not substantially so. It’s important to remember that mortgage interest rate declines don’t line up neatly with Fed rate cuts. 

This has been seen multiple times over the past year, approximately, as rates here declined to a then-2-year low and a 3-year low this past September, before the Fed formally announced a cut. That’s often due to lenders lowering interest rates in anticipation of a cut, hence the reason why the “priced in” rate offer you may see this week could be the same one you see online in the days after a Fed rate cut is formalized.

Additionally, what Federal Reserve Chairman Jerome Powell says in the press conference following next week’s meeting has the potential to impact the rate climate, and, thus, mortgage interest rates, and it could occur in a positive or negative way. So, it’s worth monitoring that press conference for hints about what’s to come in 2026. 

But the Fed isn’t the only driver to consider in terms of mortgage interest rates. The 10-year Treasury yield also plays a critical role in determining what borrowers are offered. When it rises, mortgage rates tend to follow and vice versa. This is also critical to monitor, then, for those looking for a brief window of opportunity in which they can lock in a lower rate. 

And don’t forget your own personal role in this process. You’ll be unable to take advantage of any mortgage rate drops, as significant or insignificant as they may ultimately be, if you’re not a credit-worthy borrower. So start by thinking about your credit score, look for ways to improve it, and pull your credit report now – before a lender does – to confirm that it accurately reflects your current credit health. 

The higher your score and the greater of a down payment you’re willing to make, the lower your rate offer will be (within reason). So start with an internal check of your personal finances before worrying too much about external market conditions.

Compare current mortgage rates and lenders here and see what offers are now available.

The bottom line

The chances of a Fed rate cut and, therefore, another drop in mortgage interest rates look high this December. But with only the former set for a specific calendar date, buyers and owners looking to refinance should be flexible in their approach, understanding that more affordable mortgage rate offers may not surface on a neat, linear timeline. Take the time, then, to boost your credit and calculate your budget with precision. Monitor the mortgage interest rate climate daily this month, too. 

With the right market conditions and a prepared approach, you may be able to position yourself to secure a low, locked mortgage rate again, in the final days of 2025. At the same time, if today’s rates are low enough for your budget, consider locking one in as is. Many lenders will allow you to “float down” the rate to a lower one, should it materialize before your closing date, and in the interim, you’ll be protected against any unpredictable market conditions that can cause rates to rise again.

Edited by

Angelica Leicht