{"id":236526,"date":"2025-09-18T14:19:09","date_gmt":"2025-09-18T14:19:09","guid":{"rendered":"https:\/\/www.europesays.com\/us\/236526\/"},"modified":"2025-09-18T14:19:09","modified_gmt":"2025-09-18T14:19:09","slug":"fed-rate-cut-what-it-means-for-mortgage-rates-and-the-housing-market","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/236526\/","title":{"rendered":"Fed rate cut: What it means for mortgage rates and the housing market"},"content":{"rendered":"

LOS ANGELES (AP) \u2014 Hoping that mortgage rates will keep dropping following the Federal Reserve\u2019s first rate cut<\/a> since last year? Don\u2019t bank on it.<\/p>\n

As expected, the central bank delivered a quarter-point cut Wednesday and projected it would lower its benchmark rate twice more this year, reflecting growing concern over the U.S. job market.<\/p>\n

Here\u2019s a look at factors that determine mortgage rates and what the Fed\u2019s latest move means for the housing market:<\/p>\n

How rate cuts affect mortgage rates <\/p>\n

Mortgage rates have been mostly falling since late July on expectations of a Fed rate cut. The average rate on a 30-year mortgage was at 6.35% last week<\/a>, its lowest level in nearly a year, according to mortgage buyer Freddie Mac.<\/p>\n

A similar pullback in mortgage rates happened around this time last year in the weeks leading up to the Fed\u2019s first rate cut in more than four years. Back then, the average rate on a 30-year mortgage got down to a 2-year low of 6.08% one week after the central bank cut rates. <\/p>\n

But it hasn\u2019t come close to that since.<\/p>\n

Mortgage rates didn\u2019t keep falling last year, even as the Fed cut its main rate two more times. Instead, mortgage rates rose and kept climbing until the average rate on a 30-year home loan reached just over 7% by mid-January.<\/p>\n

Like last year, the Fed\u2019s rate cut doesn\u2019t necessarily mean mortgage rates will keep declining, even as the central bank signals more cuts ahead.<\/p>\n

\u201cRates could come down further, as the Fed has signaled the potential for two more rate cuts this year,\u201d said Lisa Sturtevant, chief economist at Bright MLS. \u201cHowever, there are still risks of a reversal in mortgage rates. Inflation heated up in August and if the September inflation report shows another bump in consumer prices, it\u2019s possible we could see rates rise.\u201d<\/p>\n

How mortgage rates are set<\/p>\n

The Fed doesn\u2019t directly set mortgage rates. Instead, they\u2019re influenced by several factors, from the Fed\u2019s interest rate policy decisions to bond market investors\u2019 expectations for the economy and inflation. <\/p>\n

Mortgage rates generally follow the trajectory of the 10-year Treasury yield, which lenders use as a guide to pricing home loans. <\/p>\n

That\u2019s because mortgages are typically bundled into mortgage-backed securities that are sold to investors. To keep mortgage-backed securities attractive to investors, their yield \u2014 or annual return — is adjusted to be competitive with the yield offered by the U.S. on its 10-year government bonds. When those bond yields rise, they tend to push up mortgage rates, and vice-versa. <\/p>\n

The 10-year Treasury yield has been mostly easing since mid-July as growing signs that the job market has been weakening<\/a> fueled expectations of a Fed rate cut this month.<\/p>\n

Until now, the Fed had kept its main interest rate on hold this year because it was more worried about inflation potentially worsening due to the Trump administration\u2019s tariffs than about the job market. <\/p>\n

At the same time, inflation has so far refused<\/a> to go back below the Fed\u2019s 2% target. <\/p>\n

When the Fed cuts rates that can give the job market and overall economy a boost, but it can also fuel inflation. That, in turn, could push up mortgage rates.<\/p>\n

\u201cIt\u2019s not just about what the Fed is doing today, it\u2019s about what they\u2019re expected to do in the future, and that\u2019s determined by things like economic growth, what\u2019s going to happen in the labor market and what do we think inflation is going to be like over the next year or so,\u201d said Danielle Hale, chief economist at Realtor.com.<\/p>\n

What to expect for mortgage rates <\/p>\n

\u201cIf the Fed keeps lowering rates, it doesn\u2019t necessarily mean mortgages will go down,\u201d said Stephen Kates, financial analyst at Bankrate. \u201cIt means that they probably could go down more, and they may trend in that direction, even if they don\u2019t move in lockstep.\u201d<\/p>\n

Ahead of the Fed\u2019s rate cut, the futures market had priced in expectations that the central bank would cut its key interest rate at upcoming policy meetings this year and into 2026. But the Fed\u2019s latest projections show a less aggressive path of rate cuts than the market has been expecting. <\/p>\n

\u201cThis ongoing gap between market and Fed expectations means that some risk of upward pressure on mortgage rates remains,\u201d said Hale, adding that the decline in mortgage rates \u201cis likely to continue at least through this week.\u201d<\/p>\n

Hale recently forecast that the average rate on a 30-year mortgage will be between 6.3% and 6.4% by the end of this year. That\u2019s in line with recent projections by other economists who also don\u2019t expect the average rate to drop below 6% this year.<\/p>\n

Overall impact on the housing market<\/p>\n

The late-summer pullback in mortgage rates has been a welcome trend for the housing market, which has been in a slump since 2022, when mortgage rates began climbing from historic lows. Sales of previously occupied U.S. homes sank last year<\/a> to their lowest level in nearly 30 years and have remained sluggish so far this year<\/a>.<\/p>\n

While lower rates give home shoppers more purchasing power, mortgage rates remain too high for many Americans to afford to buy a home. That\u2019s mostly because home prices, while rising more slowly than in years past, are still up by roughly 50% nationally since the start of this decade.<\/p>\n

\u201cWhile lower rates will bring some buyers and sellers into the market, today\u2019s cut will not be enough to break up the housing market logjam,\u201d said Sturtevant. \u201cWe will need to see further drops in mortgage rates and much slower home price growth, or even home price declines, to make a dent in affordability.\u201d<\/p>\n

If mortgage rates continue to ease, home shoppers will benefit from more affordable financing. But lower mortgage rates could also bring in more buyers, making the market more competitive at a time when sellers across the country are having a tougher time driving a hard bargain.<\/a><\/p>\n

The options for home shoppers and buyers<\/p>\n

Predicting when mortgage rates will decline and by how much is daunting because so many variables can influence their trajectory from one week to the next.<\/p>\n

Home shoppers who can afford to buy at current rates may be better off buying now if they find a property that fits their needs, rather than attempt to time the market, said Kates. <\/p>\n

Many homeowners looking to refinance have already seized on the decline in rates, sending applications for refinance loans sharply higher in recent weeks.<\/p>\n

One rule of thumb to consider when refinancing is whether you can reduce your current rate by at least one percentage point, which helps blunt the impact of refinancing fees.<\/p>\n","protected":false},"excerpt":{"rendered":"LOS ANGELES (AP) \u2014 Hoping that mortgage rates will keep dropping following the Federal Reserve\u2019s first rate cut…\n","protected":false},"author":3,"featured_media":219878,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[64,126993,12042,455,57,266,49805,32555,126994,61,67,132,68],"class_list":{"0":"post-236526","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-business","9":"tag-danielle-hale","10":"tag-economic-policy","11":"tag-federal-reserve-system","12":"tag-general-news","13":"tag-inflation","14":"tag-lisa-sturtevant","15":"tag-mortgages","16":"tag-stephen-kates","17":"tag-u-s-news","18":"tag-united-states","19":"tag-unitedstates","20":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115225740388631803","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/236526","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=236526"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/236526\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/219878"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=236526"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=236526"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=236526"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}