The Current State of Interest Rates — And Where They’re Headed Through December
If you’ve been watching the housing market lately, you know that interest rates have been a huge topic of conversation. After years of sharp increases to fight inflation, we’re finally starting to see a shift — and that could have a big impact on buyers and sellers as we head into the final months of 2025.
Where Interest Rates Stand Now
As of late September 2025, 30-year fixed mortgage rates are averaging around 6.29%. That’s still elevated compared to the historically low rates we saw in 2020 and 2021, but it’s an improvement from the 7%+ levels many buyers faced just a year ago.
Why the change? The Federal Reserve recently cut interest rates for the first time this year — lowering its target range to 4.00%–4.25%. This was a widely expected move as inflation has eased from its peak, though it’s still above the Fed’s 2% target.
Mortgage rates don’t follow the Fed’s rate directly, but they’re influenced by it along with the 10-year Treasury yield. When the Fed signals a shift toward easing, bond yields often come down, which helps pull mortgage rates lower.
What’s Driving the Forecast
Several factors will shape where rates go through December:
Inflation trends → If inflation continues to cool, the Fed will have more room to cut. If it ticks back up, cuts could slow or stop.
Job market strength → A softer labor market gives the Fed cover to ease policy. Strong hiring could keep them cautious.
Market expectations → Economists and major banks (like Nomura) are forecasting two more quarter-point cuts this year — one in October, one in December.
Fed messaging → Chair Jerome Powell has emphasized that the Fed is “data dependent,” meaning they’ll move carefully and won’t lock into a preset path.
What This Means for Buyers
Improving affordability: If mortgage rates move closer to 6% by December, monthly payments could become more manageable compared to this summer.
Competition could increase: Lower rates may bring more buyers back into the market, so being prepared with financing and pre-approval is key.
Refinancing potential: Buyers who lock in now may be able to refinance into a lower rate next year if the Fed continues easing.
What This Means for Sellers
Buyer pool may grow: As affordability improves, more buyers may re-enter the market this fall and winter.
Timing your listing: If you’re flexible, listing when rates are at their lowest could help generate stronger demand.
Pricing strategy: Even with easing rates, buyers remain cost-sensitive. Pricing your home strategically will be just as important as ever.
Final Thoughts
The bottom line? Interest rates are likely to trend downward into December, but the path won’t be perfectly smooth. Buyers and sellers who stay flexible — and plan ahead — will be in the best position to take advantage of whatever the market brings.
If you’re thinking about buying or selling in the Bay Area, let’s connect. I’ll help you navigate the numbers, timing, and strategy so you can make the most of the current market.