Fall 2025 Rate Talk with Aaron Nawrocki
What’s Going On With Interest Rates — And What It Means for Homebuyers
Over the last few years, mortgage interest rates have been on a rollercoaster. After reaching historic lows in 2020 and 2021, rates surged as the Federal Reserve worked to slow inflation. Now, in fall 2025, we’re entering a new phase: stability, with signs of gradual improvement. Most chatter around rates this fall surrounds what the Fed will do at upcoming meetings.
The Fed’s Role in Mortgage Rates
It’s important to understand that the Federal Reserve does not set mortgage rates directly. Instead, it influences them through the federal funds rate, which is the short-term rate banks charge each other.
When the Fed raises the federal funds rate, borrowing costs across the economy rise. Investors demand higher returns on mortgage-backed securities, which pushes mortgage rates higher.
When inflation cools and the Fed pauses or signals future cuts, mortgage rates often stabilize or decline, as markets anticipate cheaper borrowing costs ahead.
The last two years of Fed hikes were aimed squarely at curbing inflation. Now that inflation has moderated, the Fed has held rates steady—and mortgage markets are responding with more stability. Most pundits believe more cuts are coming – the $64 question is whether potential cuts are “built into” todays lower mortgage rates, or if cuts will drive rates down further.
Where Rates Stand Now
30-year fixed mortgage rates are down from their 2024 highs but remain above the ultra-low levels seen during the pandemic.
15-year fixed rates are also easing, offering buyers lower interest costs in exchange for higher monthly payments.
Analysts broadly expect mortgage rates to trend lower in the next 12–18 months, provided inflation continues its downward path.
What This Means for Buyers
Affordability is improving: Even small declines in mortgage rates can translate into meaningful savings on monthly payments.
Competition is still out there for popular homes: As rates ease, more buyers are likely to re-enter the market, increasing competition for well-priced homes.
Refinancing could be an option: Buyers who purchased 1-2 years ago should consider looking at today’s lower rates.
The Bottom Line
Mortgage rates are moving into calmer waters, thanks to a cooling inflation picture and a less aggressive Fed. While we may not see the record-breaking lows of 2020 again, today’s environment provides more predictability—and more opportunity—than we’ve had in several years.
If you’re considering buying , the key is to focus on finding the right home, with affordable financing that fits your long-term plans. It’s likely impossible to “time” the market – long term success in real estate is all about being in it for the long term.
Aaron Nawrocki
Capital M Lending
503-880-3255
aaron@capitalmlending.com
