The Federal Reserve implemented two 25-basis-point rate cuts in the second half of the year, bringing the federal funds rate down to a target range of 3.75% to 4% by December.
In the final quarter of 2025, mortgage rates experienced a modest but meaningful decline, settling into the lower 6% range as the Federal Reserve pivot began to take hold.
Most experts, including Fannie Mae, predict rates will hover around 6.0% for much of the year, with potential to dip below 6%% if the economy slows further.
Yet inflation remains above the Fed’s 2% target, limiting aggressive rate cuts. – This is the primary reason most forecasts do not expect sub‑6% rates in 2025.