The past year has been a rollercoaster for interest rates, but in recent weeks, we’re finally seeing a bit of relief. As of mid-October 2025, the average 30 year fixed mortgage rate has eased to 6.23%, while the 7/6 adjustable rate mortgage (ARM) is averaging around 5.72%. Both are down roughly a half point from their early summer highs, a meaningful improvement for today’s buyers and homeowners considering a refinance.
It’s common to hear homebuyers say they’re “waiting for the Fed to drop rates” before moving forward. Here’s the catch: the Federal Reserve doesn’t directly control mortgage rates. The Fed only sets the short term Federal Funds Rate which influences credit cards, car loans, and home equity lines The long term mortgage rates follow the bond market, particularly the 10 year Treasury yield.
If you look back over decades, you’ll see how the Fed’s overnight rate and mortgage rates often move in the same general direction, but not always in sync. The bond market reacts to inflation expectations, investor demand, and future Fed policy, not just the Fed’s current stance.
That’s one reason why we’ve seen mortgage rates soften lately even before the Fed officially makes any cuts. The Fed meetings contemplating their overnight rates are only 8 times a year. The bond market trades daily. I could have multiple rate changes a day. The market makes it’s moves (up or down) before the Fed.
In recent comments, Fed Chair Jerome Powell hinted that the central bank might soon pause or slow its balance sheet runoff (the process of letting bonds mature without reinvesting). That’s significant as the Fed had been a major buyer of mortgage backed securities, and reducing that runoff can help stabilize or even lower mortgage rates by improving demand for those securities.
In other words, even if the Fed doesn’t cut its short-term rate yet, this balance sheet policy shift could nudge long term borrowing costs, including mortgages, lower in the months ahead.
ARM Loans Back in the Conversation
The default for most borrowers is the 30 Fixed Mortgage. Basically you’re buying an insurance policy that the rate will not change for the 30 year period. Will you be keeping that exact loan in place till it’s paid off? Will you need to pull out equity for some economic need at some point? Would you be moving/selling at some point in the future? I always say “Bribe Me”. With the 7/6 ARM now roughly half a percent below the 30-year fixed, it’s worth revisiting this option.
A 7/6 ARM is a 30 year mortgage that’s fixed for the first seven years, then adjusts every six months thereafter. For buyers planning to move or refinance within five to seven years, it can offer a meaningful savings, especially in an environment where rates could drift lower again over the next few years. It could also help qualifying for the loan if the debt to income is borderline.
For example, on a $700,000 loan, the difference between 6.23% and 5.72% can translate to nearly $200 less per month in payment during that initial fixed period. Is $16.500 over that 7 years worth it? Is paying 1/2% more for 7 years to be guaranteed what the rate is in year 8 worth it? Maybe, maybe not…
Notes: Rates presently for a 15 year fixed rate mortgage is also in the 5.8% range and will not have an adjust involved. The main consideration is the payment is substantially higher as the loan is amortized over a shorter period, and the repayment of the loan principle is twice as fast as the 30 year… Still an option for many.
Should You Refinance If You Already Have a 3% Mortgage?
If you locked in one of those pandemic era 3% loans, refinancing for rate purposes doesn’t make sense.
But that doesn’t mean a refinance can’t be beneficial, particularly if you’re looking to pull equity for renovations, debt consolidation, or to fund an investment purchase.
With property values remaining strong across the San Fernando Valley, Simi Valley, and Conejo Valley, a strategic refinance can still help you leverage equity without sacrificing your financial position.
Mortgage rates are finally trending in a more favorable direction, not because of immediate Fed action, but due to evolving bond market sentiment and hints of a policy shift at the Fed.
For buyers, this is an opportunity to re-evaluate your purchasing power before rates or home prices shift again.
For current homeowners, it’s worth reviewing your loan strategy, whether that means considering an ARM, accessing equity, or positioning for a future refinance once rates improve further. Always feel free to have me crunch your numbers, and strategize with you.
If you are in the Los Angeles area, and have any questions or real estate sales or financing needs, feel free to contact me
Ron Henderson GRI, SRES, SFR, RECS, CIAS, CREN, GREEN
President/Broker
Multi Real Estate Services, Inc.
Gov’t Affairs Chair – Southland Regional Association of Realtors (2025)
Gov’t Affairs Chair – California Association of Mortgage Professionals (2017-2018)
Chairman – OutWest Marketing Meeting (Real Estate Education)
DRE #00905793 NMLS #310358
www.mres.com
ronh@mres.com
Specialist in the Art of Real Estate Sales and Finance
Real Estate market, mortgage rates, Los Angeles, San Fernando Valley, Conejo Valley, Simi Valley, Woodland Hills, West Hills, Calabasas, Chatsworth
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