MW As mortgage rates near 6%, this key figure could unlock a refinancing wave after the Fed meeting

By Joy Wiltermuth

The bond market could help unlock the stalled housing market after this week's Fed decision

The locked up housing market could get an important signal from markets after the Federal Reserve's rate decision on Wednesday

Borrowers who took out mortgages over the past few years of high interest rates and a largely frozen housing market could finally see a big opportunity to refinance.

The Federal Reserve is widely expected to cut rates by another 25 basis points next week to a 3.75% to 4% range, which would be its lowest level since Nov. 2022.

It's helped that Friday's tame consumer price index all-but guaranteed that rate cut will happen. But traders also think additional Fed rate cuts look likely through at least January.

"The futures market basically has three cuts penciled in pretty darkly," said Andrew Wells, chief investment officer at SanJac Alpha, pointing to the odds of rate-cuts from roughly the next 90 days. Investors "can feel pretty certain the Fed doesn't want to disrupt markets," the mortgage market veteran said.

Still, the wildcard will be if the 10-year Treasury yield BX:TMUBMUSD10Y falls with next week's expected Fed rate cut. "The big thing we are all watching for next week when they cut rates is what will the long-end of the market do," Wells said.

"I think everyone wants them to come down - even the White House," Wells said of mortgage rates. SunJac oversees two exchange-traded funds SJCP SJLD and has exposure to mortgage credit. "But it's not going to happen unless the bond market wants it to happen," he said.

Watch the 10-year's reaction

In a bright spot, the 30-year fixed mortgage rate fell to an average of 6.19% as of Oct. 23, according to Freddie Mac, the lowest in a year.

Read: Mortgage rates drop to the lowest level in a year, opening 'an important window' for buyers

It's also important to recall that a year ago in September the opposite trend was gripping the housing market.

The 10-year Treasury yield, which is a peg for new 30-year fixed-rate mortgages, started out near a recent low of 3.64% in Sept. 2024. Then the yield began to climb as the Fed started cutting its short-term policy rate form peak pandemic levels. As it hit about 4.8% in Jan. 2025, the 30-year mortgage rate surged above 7%, according to Fed data.

The 10-year yield ended near 4% Friday. Its retreat since this summer increased demand for new mortgages loans. The below chart shows that roughly 20% of the outstanding U.S. mortgage market now carries a rate of 6% and higher, versus the recent lows of 2022, according to Apollo Global Management's Chief Economist Torsten Slok.

A 20% slice of the U.S. mortgage market now carries a 6%-plus rate.

While larger segments of the mortgage market still carry rates below 3% and between 3% to 4%, many borrowers still could benefit from a sub 6% mortgage refinancing opportunity.

Wells estimated that it would only take a 50 basis point to 100 basis point drop in mortgage rates to "get things going" on the refinancing front.

Fresh hope for lower mortgage rates comes as Friday's inflation data reflected a 3% annual consumer-inflation rate, still above the Fed's 2% target, but less than was expected.

Of note, the large and sticky "owners equivalent rent" component of the CPI report came in at 3.8% for the first time since Dec. 2021, according to John Kerschner, global head of securitized products at Janus Henderson.

"This demonstrates that housing continues to slow across most of the country helping pull down inflation," Kerschner said, in emailed comments.

Fed rate cuts could drive the 30-year mortgage rate "below the psychologically important 6% level" and potentially "bring some new life back into housing," he said.

But fresh lending activity also could create headaches for the Fed as it works to get inflation all the way back down to its annual target.

"We are in the camp that it's just going to be with us for a while," said Wells at SunJac of inflation. "If it's in the 3% realm and stays there, they [at the Fed] are going to have tough decisions to make."

"You can't keep cutting rates into inflation."

-Joy Wiltermuth

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October 25, 2025 11:02 ET (15:02 GMT)

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