Fed Rate Cut: What It Means for Your Next Move

The Federal Reserve just cut interest rates again—bringing the federal funds rate down to 3.50%-3.75%, the lowest we've seen since November 2022. If you've been watching mortgage rates and waiting for the right moment to make your move, this news matters. But here's the reality: lower rates alone won't solve everything, especially in a market where affordability is still tight and inventory remains limited.

So what does this rate cut actually mean for you if you're looking to buy a house in RI or sell your home? Let's break down what's happening, what the Fed is signaling for 2026, and how you can make smart decisions right now. data

The Fed's 2026 Plan: Slow and Steady (Maybe Just One More Cut)

Fed Chair Jerome Powell made it clear in his December press conference: they're not in a rush to cut rates further. In fact, the Fed's own projections suggest just one more rate cut in 2026—likely bringing rates down to around 3.4%. That's far less aggressive than what markets were hoping for.

Why the cautious approach? Inflation is still running at 3.0% (well above the Fed's 2% target), and unemployment has ticked up to 4.4% nationally. The Fed is trying to thread the needle—bringing down inflation without tanking the job market. It's a delicate balance, and they're clearly not confident enough to commit to aggressive cuts.

Adding to the uncertainty: Powell's term as Fed Chair expires in May 2026. That leadership transition could shift policy direction entirely, so predicting what happens beyond mid-2026 is anyone's guess.

What This Means If You're Buying a Home Right Now

If you're a buyer, here's the honest truth: rates are better than they were a year ago, but they're not going back to pandemic lows anytime soon. Waiting for rates to drop to 4% or 5% could mean waiting years—and in the meantime, home prices may keep rising.

Here's what you can do right now:

• Get pre-approved and understand your budget. Use a mortgage calculator to see what you can comfortably afford at today's rates. Don't stretch yourself thin hoping rates will drop next year.
• Look for special financing programs. Many states and local programs offer below-market rates or down payment assistance for first-time buyers. Ask your real estate agent about programs you might qualify for.
• Negotiate aggressively. With more homes sitting on the market longer, sellers are more willing to offer concessions—like covering closing costs or including a rate buydown.
• Consider a rate buydown strategy. Some sellers will pay points upfront to lower your rate temporarily (like a 2-1 buydown). This can make your first few years of ownership much more affordable.

The bottom line: if you find the right home and the numbers work for your budget today, don't wait for perfect rates. You can always refinance later if rates drop significantly.

What This Means If You're Selling Your Home

For sellers, slightly lower rates are good news—they bring more buyers back into the market. But here's the catch: inventory is still tight, and that means competition among sellers is heating up in some areas.

Right now, many markets are sitting at around 2-3 months of inventory—below the 5-6 months that would indicate a balanced market. That's still technically a seller's market, but it's not the wild bidding-war environment we saw in 2021-2022.

Here's how to position yourself for success:

• Price competitively from day one. Buyers today have options, so overpricing will just leave your home sitting. Work with your agent to set a strategic price based on current market data.
• Make your home show-ready. Small improvements—fresh paint, decluttering, updated lighting—can make a huge difference in how quickly you sell and for how much.
• Consider offering buyer incentives. If you want to stand out, offer to cover closing costs or provide a rate buydown credit. These concessions can be the difference between a quick sale and sitting on the market for months.
• Be flexible with timing. If you can accommodate a buyer's preferred closing date or allow them to rent back for a few weeks, you'll appeal to a wider pool of serious buyers.

The key is understanding your local market. In high-demand areas like Providence, Warwick, and Newport, well-priced homes are still moving quickly. In softer markets, you may need to be more aggressive with pricing and incentives.

Don't Forget: Other Borrowing Costs Are Dropping Too

While mortgage rates get all the attention, other types of borrowing are getting cheaper too:

• Home Equity Lines of Credit (HELOCs) are averaging around 7.44%-7.81%, the lowest rates of 2025. If you're a homeowner with equity, this is a much better option than credit cards (which average 24% APR).
• Auto loans for qualified buyers are down to around 4.88% for super-prime borrowers.
• Credit card rates are finally coming down slightly to around 23.96%, though that's still painfully high.

If you've been carrying high-interest debt, now's a good time to explore refinancing or consolidating with lower-rate options like a HELOC or personal loan.

Bottom Line

The Fed's December rate cut is good news, but it's not a game-changer. Mortgage rates are better than they were a year ago, but they're not dropping back to pandemic levels anytime soon. For buyers, that means making smart decisions with today's rates rather than waiting for perfect conditions. For sellers, it means pricing strategically and offering incentives to stand out.

The real estate market is still moving—it's just moving differently than it did a few years ago. And with only one more rate cut expected in 2026, the time to act is now if you're ready to make a move.

Want to talk through your specific situation? Whether you're looking to buy a house in RI, sell your home, or just want to understand what makes sense for you right now, let's connect. We'll break down the numbers and help you make the smartest decision for your situation.

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