(Above) U.S. Federal Reserve Chair Jerome Powell delivers remarks at a news conference following a Federal Open Market Committee meeting at the Federal Reserve on December 10, 2025, in Washington, D.C. Photo by Sha Hanting/China News Service/VCG via AP.

By Don DeBat

Dec. 15, 2025 – If you are a prospective home buyer or a homeowner seeking to refinance in 2026, chances are it will be a long, cold winter – or maybe two winters – before mortgage rates decline into an affordable 5 percent range.

On December 10, the Federal Reserve lowered its benchmark lending rate by 0.25 percent to a range of 3.5 to 3.75 percent – the lowest rate in nearly three years. However, other gloomy political forces are working against bigger near-term interest-rate declines.

The Federal Open Market Committee, which sets national monetary policy to promote maximum employment and stable prices, waded through flack-filled economic outlooks clouded by the following bad-weather political storms:

Inflation. Accurate economic data evaporated during the record 43-day federal government shutdown in October and November that pitted angry Democrats against Republicans. With key federal workers out to lunch in Washington, D.C., the Fed’s most accurate inflation data was pegged at 2.8 percent and covered the month of September. This week, analysts said October’s inflation data likely was higher.

Tariffs. President Donald Trump’s monumental $159 billion in international tariffs on imports to the United States have cost the average American household nearly $1,200 in 2025. Tariffs – the highest since 1935 – rose a whopping 16.8 percent from 2.4 percent last year.

Fed Chair Jerome Powell said: “If you get away from tariffs, inflation is in the low-2 percent bracket. It’s really tariffs that are causing most of the inflation overshoot.” (Left) Shipping containers at a facility at PortMiami.

Job-formation slowdown? The Bureau of Labor Statistics didn’t release an official jobs report for October because of the shutdown. Private sector employment was up 42,000 jobs in October, but 32,000 jobs were shed in November, according to other sources.

The Fed is tracking the slowdown in the labor market. However, Powell noted that President Trump’s immigration policy had an impact on turning the labor supply negative.

Maybe that is why hundreds of Chicagoans were having trouble hiring landscapers for cleanup of autumn leaves, and snow removal teams for the 17 inches of early November snow.

Over time, lower interest rates set by the Fed can bring down borrowing costs for home mortgages, auto loans, and credit cards, though market forces can also affect those rates.

With all this economic gloom in the air, it is no wonder that the Fed’s rate-setting committee signaled that it may keep its rate unchanged in the coming months. And, in a set of quarterly economic projections, Fed officials said they expect to lower rates just once next year.

That means it is likely that home buyers and homeowners seeking to refinance with a 30-year mortgage at under 6 percent may have to wait until 2027.

On the other hand, Powell’s term as Fed chair ends in May 2026, and President Trump, who has been a Fed critic, likely will appoint a new chair who favors lower interest rates.

Mortgage rates inch lower

On December 11, Freddie Mac’s nationwide Primary Mortgage Market Survey reported that benchmark 30-year fixed-rate loans eased slightly to an average of 6.22 percent from 6.19 percent a week earlier. A year ago, the rate was 6.62 percent.

“The average 30-year fixed-rate mortgage is well below the year-to-date average of 6.62 percent, providing some sense of balance to the housing market,” said Sam Khater, Freddie Mac’s chief economist.

However, 15-year fixed mortgages averaged 5.54 percent on December 11, up from 5.44 percent a week earlier. A year ago, the 15-year fixed loans averaged 5.84 percent.

The Freddie Mac survey is focused on conventional, conforming, fully amortizing home purchase loans for borrowers who place 20 percent down and have excellent credit.

Homeowners who currently have a low 3 to 4 percent mortgage interest rate and want to stay in their existing dwellings may affordably tap their home equity to expand their living space, renovate a kitchen, or add an updated bath. On November 12, Home Equity Line of Credit (HELOC) interest rates nationwide slipped to an average of 7.99 percent from well above 8 percent. Compare that rate with 19.99 to 30 percent credit card interest, which hasn’t budged much despite the Fed’s rate-lowering efforts.