My brother rang me last week. “Should I buy now or wait?” Everyone says rates are plummeting, but they’re not actually plummeting.” He has saved $80,000, been house hunting for six months, and keeps getting cold feet. Can’t blame him. Mortgage rates in 2025 have been all over the place. The average 30-year fixed rate currently stands at 6.19% as of October 28th. That’s well off the 7% rates we had in January, but still far above the 2.65% average from 2021. Anyone who locked in those pandemic rates is sitting pretty today. Everyone else? We’re stuck paying double.
Inflation’s Running the Show
New inflation data dropped on Friday, showing inflation hit 3% in September, up from 2.9% in August. Not great. The Fed wants inflation at 2%. We’re not there yet. President Trump’s tariff policies have pushed prices higher than expected, making the Fed’s job harder. They’re trying to cool inflation without tanking the economy. Good luck with that. Here’s the thing nobody wants to say out loud.
We’re not getting back to 2-3% mortgage rates in our lifetimes unless another major crisis hits. Those rates were an anomaly. Historical averages from the 1970s through the 1990s hovered around where we are now, with mortgage rates exceeding 18% in September, October, and November of 1981. So yeah, 6.19% sucks compared to 2021. But historically? Pretty normal.
What the Fed Did in September Changed Nothing
The Fed finally cut rates in September after holding steady most of 2025. Quarter-point reduction. Everyone got excited. Guess what happened to mortgage rates? They went up. Sounds backwards, but makes sense once you understand how this works. Mortgage rates act on anticipation, not actuality. Markets already priced in the September cut months earlier. When it actually happened, investors moved money around and rates climbed.
October’s looking like another quarter-point cut. There’s a 96.7% probability the Fed will cut its benchmark rate by 0.25 percentage points at its meeting ending October 29. Will mortgage rates drop because of it? Probably not much. Already priced in.
Why New Inflation Data Matters More Than Fed Cuts
Here’s what actually moves mortgage rates. Inflation expectations, not what the Fed does. When the core PCE index shows inflation at 2.4%, lenders start thinking, “Okay, we’re getting closer to the 2% target.” That makes them slightly less nervous about lending at lower rates. But when inflation ticks back up to 3%? Lenders get spooked. They bump rates to protect themselves because inflation eats into their profits.
They’re lending you money today that you’ll pay back over 30 years. If inflation runs hot, that money they get back is worth less. So they charge more upfront to compensate. The September inflation report showing 3% was cooler than expected but still above the target. Concerns about tariffs driving prices higher haven’t shown up in most categories yet, which is good news. But nobody knows if that’ll hold.
Jobs Data Is Missing Because of the Shutdown
Want to know something wild? President Trump fired the Bureau of Labor Statistics commissioner following a weak employment report back in August. Then the government shutdown meant the September jobs data never got released on time. The Fed’s making decisions partially blind. They’ve got access to a wide variety of public and private sector data that remained available, but still.
The monthly jobs report is huge for understanding where the economy’s headed. The Federal Reserve has a difficult balancing act because it’s concerned about boosting employment while also managing the possibility of renewed inflation from tariffs. Tough spot. Weak job numbers usually mean the Fed cuts rates more aggressively to stimulate the economy. Strong job numbers mean they can take their time. Without good data, they’re guessing.
Treasury Yields Control Mortgage Rates
The Fed does not set mortgage rates directly. Mortgage rates are not directly determined by the Fed but rather by investor appetite for 10-year Treasury bonds. The 10-year Treasury yield is approximately at 4.1% as of October 2025. Mortgage rates follow when Treasury yields rise. Lower yields mean lower mortgage rates. Treasury yields rise and fall according to expectations for inflation and economic growth.
When investors believe inflation is making a comeback, they dump bonds, and yields skyrocket. When they believe that a recession is on the way, it leads to the buying of bonds and falling yields. So, watching inflation data matters more than watching Fed announcements. Fed’s already factored into Treasury yields weeks before they actually do anything.
Housing Market’s Still Stuck
Low pandemic-era rates keeping homeowners from moving when they otherwise would have, become known as the “golden handcuffs”. Nobody with a 3% mortgage wants to sell and buy again at 6%. They’d basically double their monthly payment for the same house. This created a supply problem. Not enough homes for sale. Prices are staying high despite higher rates.
Fannie Mae predicts a 2.8% price increase in 2025. So even if rates drop a bit, you’re paying more for the actual house. Home sales are projected to go from 4.72 million units in 2025 to 5.16 million in 2026 as rates ease slightly. That surge in demand could keep prices elevated, though. More buyers chasing the same number of homes doesn’t help affordability.
What’s Actually Affordable Right Now
The national median family income for 2025 is $104,200, and the median existing home price in August was $422,600. Based on 20% down and a 6.39% rate, a monthly payment of $2,113 is 24% the typical family income. That’s technically affordable by traditional standards. Most lenders want housing costs under 28% of gross income. But it feels tight when you factor in property taxes, insurance, maintenance, and utilities.
Plus, saving that $80,000-$100,000 down payment takes years for most people. By the time you’ve saved it, home prices have climbed another 10-15%. You’re chasing a moving target. My brother’s stuck in that exact situation. Saved his down payment, but now the houses he could afford two years ago are out of reach. He can buy something smaller or farther out, but neither option feels great.
Rate Predictions Through 2026
Forecasts from Fannie Mae, the Mortgage Bankers Association, and Freddie Mac show mortgage rates expected to see a modest decline over the next 12 months, gradually easing from the mid-6% range towards the low 6% range by late 2026. Not dramatic. We’re not talking about dropping from 6.2% to 5.8% in a quarter here — we’re looking at it over the course of a year. Better than nothing, but not a game-changer for affordability.
If inflation moves significantly higher, the Fed may hold off on further rate cuts, leaving mortgage rates higher for longer. It all hinges on new inflation data each month. One bad inflation report could stop the whole rate-cutting cycle. One good report could accelerate it. Impossible to predict with Trump’s tariff policies, creating uncertainty about prices.
Should You Buy Now or Wait?
Here’s what I told my brother. Trying to time mortgage rates perfectly is like trying to time the stock market. You’ll drive yourself crazy. If you find a house you like, can afford the payment, and plan to stay at least five years, just buy it. You can refinance later if rates drop significantly. Waiting another year, hoping for 5.5% rate,s means paying another year of rent and watching home prices climb.
As of October 23, 2025, the average 30-year fixed mortgage rate hit 6.19%, marking the lowest level in a year. That’s about as good as it’s gotten lately. Plus, there’s value in locking in a purchase price. Home values keep climbing. Better to buy at $425,000 with a 6.2% rate than wait and buy the same house for $445,000 at 5.8%. The math doesn’t work out in your favor.
Bottom Line on New Inflation Data Affects Mortgage Rates
New inflation data affects mortgage rates more than anything else right now. Fed cuts are already priced in. What matters is whether inflation keeps cooling toward 2% or stays elevated around 3%. Every monthly CPI report moves markets. Every PCE index reading shifts expectations. Lenders adjust rates based on where they think inflation’s headed, not where it is today. October’s Fed meeting will probably deliver another quarter-point cut. Won’t change mortgage rates much. January’s inflation data? That could move rates significantly, depending on what it shows.
My advice? Stop obsessing over rate predictions. Focus on what you can control. Improve your credit score for better rates. Save a bigger down payment to reduce the loan amount. Shop multiple lenders to find the best deal. Rates might hit 5.8% by the end of 2026. They might stay at 6.2%. They might spike back to 7% if inflation flares up. Nobody knows. All the forecasts are educated guesses based on assumptions that might not pan out.
What do I know for sure? Rates aren’t hitting 3% again without a major economic crisis. The 2021 rates were a once-in-a-lifetime opportunity that most people didn’t fully appreciate until they were gone. Today’s rates feel high because we’re comparing them to abnormally low rates. Compared to historical averages, they’re pretty standard. That’s the reality of the 2025 housing market.
