How the Fed’s December Rate Cut Is Changing a $600,000 Mortgage Payment
If you’ve been watching mortgage rates all year, December finally brought some welcome breathing room. After months of economic uncertainty, the Federal Reserve announced another quarter-point interest rate cut at its December meeting, marking the third reduction in just four months. That move pushed the federal funds rate to its lowest level since 2022, signaling a clear shift away from the aggressive tightening that defined the past few years.
While mortgage rates don’t move in lockstep with the Fed’s benchmark rate, they tend to respond to the overall direction and sentiment created by these decisions. And that’s exactly what has been seen over the past few months. The rate cuts in September and October helped ease mortgage rates, and the December cut added a bit more downward pressure. As a result, today’s mortgage rates are noticeably lower than where they stood at the start of 2025, and even lower than many points in 2024.
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So what does that mean in real dollars for buyers? Let’s take a $600,000 mortgage, a common loan size in many U.S. housing markets. Right now, the average rate for a 30-year fixed mortgage sits around 5.99%, while a 15-year fixed mortgage averages about 5.37%. At those rates, the monthly payment on a 30-year loan comes in at roughly $3,593. On a 15-year loan, the monthly payment is higher, about $4,861, but the loan is paid off much faster and with significantly less interest over time.
To understand how meaningful that shift is, it helps to look back to January 2025. At that point, 30-year mortgage rates were averaging just over 7%, and 15-year rates were above 6.25%. On the same $600,000 loan, monthly payments back then would have been around $4,008 for a 30-year mortgage and about $5,151 for a 15-year mortgage. Compared to today, that’s a savings of roughly $415 per month on a 30-year loan and close to $290 per month on a 15-year loan.
Even compared to last summer, today’s rates offer relief. Borrowers are now saving a couple hundred dollars a month versus August 2024, which can add up to several thousand dollars a year. Still, challenges remain. Housing inventory is tight, prices are high in many areas, and the Fed has signaled that only limited rate cuts may come in 2026.
For buyers who can afford today’s payments and have found the right home, locking in now can make sense. And if rates move lower down the road, refinancing remains an option. For now, though, the December rate cut has clearly made a $600,000 mortgage more manageable than it was just months ago.
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