Mortgage Rates Inch Toward 6% as Fed Weighs October Cut

Mortgage rates fell for the fourth consecutive week, finally nearing 6% for the first time since September 2024.

Lenders and analysts have been anticipating that the Federal Reserve will announce another quarter-point cut to the federal funds rate at their Oct. 28-29 meeting. Central bankers will make their decision with limited information, as official data like the September jobs report haven’t been released amid the ongoing government shutdown.

The average 30-year fixed mortgage rate fell four basis points to 6.04% APR in the week ending Oct. 23, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Some central bankers favor another rate cut

Fed Governor Christopher Waller said he supports further cuts to the federal funds rate while speaking at the Council on Foreign Relations in New York last week. He acknowledged that with economic activity and unemployment both on the rise, the Fed will need to move with caution.

Susan M. Collins, a fellow member of the Federal Open Market Committee and president and CEO of the Federal Reserve Bank of Boston, indicated that she was also in favor of lowering rates in remarks to the Greater Boston Chamber of Commerce on Oct. 14. She characterized inflation risks as “somewhat more contained,” with unemployment posing the larger risk to overall economic health.

Collins’ position on inflation was strengthened by the latest Consumer Price Index, one of the very few economic indicators we’ve gotten during the government shutdown. Released on Oct. 24, it showed inflation at 3% over the past 12 months — slightly below economists’ expectations.

While the Fed needs to consider both inflation and employment, Waller said labor will likely be “the more salient factor” for monetary policy decision-making. That is to say, cutting rates could cause inflation to rise a little more, but the Fed may be willing to take that risk in order to curb worrying unemployment numbers.

The problem with recent economic activity reports

One argument against cutting rates is that rising inflation could adversely affect consumer spending, which has been strong according to the latest available data. But reports pointing to a robust economy might not be capturing the full picture. The unemployment rate is measured across economic classes, while current spending levels are disproportionately held up by the wealthiest consumers.

“The U.S. economy is being largely powered by the well-to-do,” wrote Moody’s Analytics Chief Economist Mark Zandi on X during the Fed’s meeting last month. According to Zandi, spending among the top 20% of households by income increased during the second quarter of 2025, while spending among the bottom 80% of U.S. households has mostly just matched the pace of inflation since the pandemic.

Waller also mentioned this idea in his Oct. 16 speech, underscoring the outsized influence that top earners have on consumption data while remaining “fairly unaffected by higher prices, higher unemployment, or a slower economy.”

This dichotomy is apparent in the housing market, too, even as existing home sales grew 4.1% year-over-year in September. National Association of Realtors Chief Economist Lawrence Yun broke down home sales by price category in his call following the release of the September Existing Home Sales Report. “It’s the upper end that’s moving,” Yun said.

Sales of homes over $1 million increased by 20% year over year, he said, while sales of homes priced between $250,000 and $500,000 — where the typical American home falls — grew half as quickly at 10%.

What a rate cut means for mortgage shoppers

Even with mortgage rates falling, home shoppers still face high prices and a limited supply of available real estate. Existing homeowners may be more primed to take advantage of falling rates by refinancing, especially if they bought within the past few years.

For example, if you bought a house in the first week of May 2024, your mortgage rate might be somewhere around 7.32%. If you took out a $300,000 mortgage, refinancing to a rate of 6% could lower your monthly payments by nearly $290 and save you more than $66,700 over the life of the loan, even after paying closing costs.