There are a few big things retirees should know about reverse mortgage rates in today’s market.

The Federal Reserve announced its first rate cut of 2025 yesterday, lowering its benchmark rate by a quarter of a percentage point. After holding steady for months in the face of stubborn inflation, the Fed is now signaling that borrowing costs may finally begin easing again, despite inflation ticking back up over the last few months.

That comes with big benefits for borrowers, as even a relatively small rate cut can have ripple effects across the financial system, reducing the cost of credit cards, auto loans, personal loans — and most notably, mortgage borrowing.

And, the effects of the Fed rate cut are already visible. The average 30-year fixed mortgage rate is now sitting at 6.13%, the lowest level in three years. That eases the financial pressure on borrowers, who were facing average mortgage rates of above 7% earlier this year. To illustrate, a $500,000 conventional mortgage at 7% translates into a monthly payment of roughly $3,327. At a rate of 6.13%, though, that payment drops closer to $3,040 per month, a savings of about $300 each month. For households stretching their budgets, that type of payment difference can be a game-changer.

But when it comes to reverse mortgages, which is a tool many retirees use to convert home equity into usable income, the impact of a Fed rate cut isn’t as straightforward. Reverse mortgages don’t track the Fed’s benchmark rate in the same way reverse mortgages do, and several other variables come into play. Understanding those differences is critical if you’re considering this option in today’s shifting rate environment. Below, we’ll detail what to consider right now.

3 things retirees should know about reverse mortgage rates now
Reverse mortgages can provide an important safety net for retirees, but the way they’re priced is unique. Here are three key things to understand about how today’s lower-rate environment may (or may not) affect your reverse mortgage options:

Reverse mortgage rates are influenced by multiple factors
While there are numerous factors at play, traditional mortgage rates tend to move in tandem with Treasury yields and Fed policy expectations, as evidenced by the significant mortgage rate drop that occurred in conjunction with yesterday’s Fed rate cut. Reverse mortgage rates, however, are shaped by a broader mix of factors. For example, reverse mortgage lenders set their own margins and investor appetite for mortgage-backed securities affects funding costs. Strict program rules also establish the boundaries for pricing.

That means while Fed cuts create downward pressure, reverse mortgage rates don’t automatically fall at the same pace, or in the same magnitude, as conventional mortgages. Some reverse mortgage lenders may move quickly to reduce their rates, but others may keep them flat to preserve margins. For borrowers, this underscores the importance of shopping around. Getting quotes from multiple reverse mortgage lenders can help you capture any available savings in a rate environment that’s still finding its footing. MoneyWatch: Managing Your Money. For your local Reverse Mortgage professional call Scott Underwood at (205) 908-2993.