At a Glance:

• The Federal Reserve cut its benchmark rate by 0.25% on Oct. 29 — its second cut of the year after a 0.25% cut in September.
• Mortgage rates rose following the announcement, driven by Chair Powell’s cautious tone on future policy.
• The Fed will end Quantitative Tightening in December, a move that may help stabilize long-term rates over time.
• Mortgage rates remain below elevated levels seen earlier this year, a welcome trend for buyers and homeowners considering a refinance.

The Federal Reserve lowered its benchmark interest rate by 0.25 percentage points last week, bringing the federal funds rate to a range of 3.75% to 4.00%.¹ This marks the second rate cut of 2025 and the second consecutive cut following a similar move in September.

While the rate cut was widely expected, mortgage rates rose following the announcement. The move was driven by Chair Powell’s press conference, where he stated that a December rate cut is “far from” a foregone conclusion.² That shift in tone prompted markets to reprice expectations, pushing the 10-year Treasury yield — and mortgage rates — higher. 

In advance of the Fed’s meeting, the average rate for a 30-year fixed conforming loan was hovering near 12-month lows at 6.12% on October 28. By November 3, the average 30-year conforming rate had risen to 6.209%.³

“This rate cut doesn’t resolve everything, but it marks a shift,” said Brett Hively, Senior Vice President and Mortgage Capital Markets and Financial Strategist at Ameris Bank. “The Fed’s pivot signals a move away from defensive policy and toward a more balanced, growth-aware stance.” 

Why Mortgage Rates Reacted This Way 

Mortgage rates are influenced more by long-term Treasury yields than by the Fed Funds rate. When investors expect future rate cuts, yields tend to fall. Powell’s remarks introduced uncertainty, causing yields to rise instead.

The Fed also announced it will end Quantitative Tightening (QT) on December 1. QT is the process of reducing the Fed’s balance sheet by allowing bonds — including mortgage-backed securities (MBS) — to mature without reinvestment. Ending QT means the Fed will stop shrinking its holdings, which can help stabilize long-term rates.

While the Fed is expected to reinvest MBS paydowns into short-term Treasurys, the shift is viewed as a step toward balance-sheet normalization.⁴

“Over time, this could reduce supply pressure in the bond market and support lower yields, though the immediate impact on mortgage rates has been limited,” Hively said. 

What This Means for the Housing Market 

Mortgage rates have trended downward over the past several months, reaching their lowest levels in more than a year prior to the Fed’s recent announcement. While rates ticked up following Powell’s remarks, they remain well below the elevated levels seen during the spring buying season. This is a welcome shift for prospective buyers who have been waiting for rate relief — and for current homeowners considering a refinance. 

At the same time, several market indicators point to improving conditions for buyers and agents heading into year-end:
 

• Inventory is building. As noted in our October 15 edition, active listings have increased in many markets, with homes spending more time on the market — giving buyers more choice and negotiating power.
• Builder activity is steady. New construction starts have held up, and builder incentives have begun to shift as financing costs stabilize.
• Affordability remains tight, but stable. While rates are elevated compared to pre-pandemic norms, there have been signs of price moderation in several metro areas, helping to balance monthly payment pressures.

Looking ahead to 2026, the Fed’s decision to end Quantitative Tightening — along with the possibility of additional rate cuts — may create a more favorable environment for home financing. While timing remains uncertain, recent policy shifts suggest a gradual path toward rate stability.

“We’re not expecting rates to fall sharply overnight,” Hively said. “But the Fed’s pivot sets the stage for more predictable pricing and better borrower sentiment as we move into next year.”

For buyers, today’s market may offer more flexibility and negotiating room than we've seen in recent years, and for those who purchase now, future rate relief could present opportunities to refinance as conditions improve.


Sources:
¹ https://www.federalreserve.gov/newsevents/pressreleases/monetary20251029a.htm
² https://www.reuters.com/business/fed-adds-wrinkle-markets-with-december-cut-now-doubt-2025-10-30/
³ https://www2.optimalblue.com/obmmi
⁴ https://www.reuters.com/business/finance/fed-end-balance-sheet-reduction-december-1-2025-10-29/


The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Ameris Bank does not endorse nor is affiliated with the companies listed in this article.