The Federal Reserve is somewhat doing its part in helping save Americans from the depths of sky-high interest rates, and insane prices. They instituted three rate cuts in 2025, that have brought things back to a semi-normal. But the problems are still raging, as Fed Chair Jerome Powell gets into a political rock fight with President Trump over inflation and tariffs.

The rate cuts at the last Fed meeting a few weeks ago was a nice early Christmas present for Americans but it ultimately does not help much outside of credit card bills. Mortgage relief is still lagging way behind, even going up in some instances amid the cuts.

Market analyst Jeff Ostrowski says this is not uncommon, as mortgage rates tend to zag as the Fed zigs.

"Mortgage rates are not directly controlled by the Federal Reserve...the Fed might move in one direction, and mortgage rates move a different direction," he says.

Just for reference, the Fed instituted three rate cuts in 2024, and during that time period, mortgage rates actually increased slightly. Currently, mortgage rates sit at 6.17 percent. The two are not correlated, but the Fed does play a role in aiding them to come down.

They set the overall tone of things for the economy. Their tone has clearly been they hate what President Trump is doing and are sitting on their hands waiting to see the tariff doom and gloom they are almost twistedly praying to happen.

But the thing is, when it comes to mortgage rates, bad news is good news. So, you have to be careful about what you are wishing.

"If there was a recession, that definitely would push mortgage rates down...everyone looks at three percent mortgage rates as 'the good old days,' but really, mortgage rates only went that low because something had gone horribly wrong with the economy," says Ostrowski.

That horrible thing was the COVID-19 pandemic where we not only shut down businesses, but we gave out free stimulus checks to Americans. All of that combined sent the economy into a tailspin from which it still has yet to recover.

But it is trying to under the Trump administration, and we have seen very positive things as we end the first year of Trump's second term.

However, you can expect the status quo when it comes to mortgage rates in the coming year.

"The jobs market is slowing a bit...it seems like mortgage rates are going to settle into this range of 6.25 percent or 6 percent," Ostrowski says.

So, while mortgage rates might not be coming down much, there is positivity on the horizon. The economy appears to be heating up a bit, with new tariff revenue adding to hopes for a turnaround. It could be a big year in 2026.

Doug Pike