The Federal Reserve voted Sept. 17 to cut the federal funds rate by one quarter of a percentage point. It was a move long anticipated by financial markets, and also by regular folks watching the housing market: Potential home buyers who\u2019ve been sidelined by high mortgage interest rates and newer homeowners hoping to refinance their loans.<\/p>\n
Here\u2019s what the Fed\u2019s latest move<\/a> could mean for mortgage interest rates, home buyers and refinancers.<\/p>\n Mortgage rates have already dropped<\/p>\n The Fed uses a key short-term borrowing rate to influence the broader economy. Those changes don\u2019t directly alter mortgage interest rates<\/a>, and in recent cycles, rates have moved ahead of official decisions from the central bankers. Mortgage rates tend to take their cues from bond markets, and in the run-up to September\u2019s meeting, average rates for 30-year, fixed-rate loans hit their lowest levels in nearly a year.<\/p>\n Afterward, mortgage rates rebounded a bit as markets worked through the news that came with the Fed cut<\/a>. During his post-announcement press conference, Federal Reserve Chair Jerome Powell discussed the tension the current economy has created between the central bankers\u2019 two key goals. The Fed aims to achieve \u201cmaximum employment,\u201d and the weakening job market suggests lowering rates to give businesses a boost. But the bankers also want price stability, and an overheated rate of inflation could be cooled by raising interest rates.<\/p>\n By choosing to cut, the Fed governors basically decided that labor\u2019s a more immediate threat. But in the press conference, Powell noted, \u201cThere are no risk-free paths now. It\u2019s not incredibly obvious what to do.\u201d<\/p>\n \u201cWhere mortgage rates are going to go is really dependent on the data that we get in the weeks to follow,\u201d says Melissa Cohn, a regional vice president at William Raveis Mortgage. \u201cThere\u2019s clearly no direction from Powell or from what the Fed has done<\/a> today that says the rates are just going to march downwards.\u201d<\/p>\n Maybe next year for home buyers<\/p>\n Since the pandemic dramatically altered the housing market, each new year gets touted as the year the housing market will finally normalize. As for 2025 \u2026 well, maybe 2026 will be the year. Rates may be lower, but mortgage interest rates aren\u2019t the only thing holding back would-be buyers.<\/p>\n \u201cEven though affordability had been improving a little bit in 2025, what really kept buyers on the sidelines this year was the frozen labor market,\u201d says Orphe Divounguy, senior economist at Zillow. It\u2019s not necessarily that people are buying (or not) because of a job change \u2014 but economic uncertainty can discourage making a major life decision like buying a home.<\/p>\n The dearth of buyers had listings gathering dust. Divounguy notes that in July, Zillow saw price cuts on 27.4% of listings \u2014 the highest percentage since data gathering began in 2018. \u201cSellers had come back in the spring, but then the buyers weren\u2019t there,\u201d Divounguy explains.<\/p>\n And by August, sellers were feeling the chill, too, dropping the number of new listings. Again, a seemingly weaker economy likely played a role: In a 2024 Zillow survey, 37% of sellers cited getting a new job as a reason for selling. \u201cThere was a window there for buyers that could afford to buy,\u201d Divounguy says, but with sellers retreating, \u201cthat window, at least for 2025, seems to be closed.\u201d<\/p>\n Confident buyers can certainly still take advantage of the current rate environment \u2014 but they should be aware that inventory may be limited, even for fall<\/a>. Divounguy is hopeful that in 2026, \u201cFed rate cuts could thaw the labor market,\u201d getting both buyers and sellers back in the game. A major rate-cutting cycle from the Fed would likely usher in lower mortgage rates, too.<\/p>\n The time is now for many refinancers<\/p>\n A substantial subset of current homeowners looking for rate relief are in better luck.<\/p>\n \u201cWe\u2019ve seen mortgage rates in the past couple years approach as high as almost 8%,\u201d so relatively new home buyers could be ready to refi, notes Danielle Hale, chief economist for Realtor.com. \u201cEven earlier this year there was a period when rates were close to 7%. Now that they\u2019re back under 6.5%, some people who bought as recently as this year may be in a position where refinancing makes sense<\/a>.\u201d For a refi to be worthwhile, you\u2019d want to cut at least half a percentage point off your current rate.<\/p>\n Hale also points out that if you\u2019re starting over with a new 30-year loan, you\u2019re getting additional upfront savings. The longer term spreads your balance over more payments, bringing the monthly cost down (though at the same time, the total interest paid will be higher because it\u2019s a longer loan). \u201cIf you\u2019re refinancing for a cashflow reason and you don\u2019t mind tacking a couple extra years onto the end of your loan, extending the term may not be a bad decision,\u201d she says.<\/p>\n Refinance closing costs<\/a>, generally 2% to 6% of the amount financed, are a consideration as well. Still, homeowners anxious to break free from a 7%-plus mortgage rate may decide that\u2019s a price they\u2019ll gladly pay.<\/p>\n But should you wait for rates to drop even lower? \u201cWe can\u2019t get too greedy,\u201d cautions William Raveis\u2019 Cohn. \u201cWe\u2019ve taken a big drop in rates over the course of the past month and we cannot expect it to continue at this pace.\u201d<\/p>\n Hale concurs: \u201cEven the best forecasters are still making an educated projection based on what we know today, and then the world can evolve in very surprising ways.\u201d<\/p>\n Bottom line: If your refinance math<\/a> looks good and you\u2019re planning to stay in your home, this could be your moment.<\/p>\n More From NerdWallet<\/b><\/p>\n Kate Wood writes for NerdWallet. Email: kwood@nerdwallet.com.<\/p>\n The article The Fed Cut Rates. Will It Help the Housing Market?<\/a> originally appeared on NerdWallet.<\/p>\n If you purchase a product or register for an account through a link on our site, we may receive compensation. By using this site, you consent to our User Agreement<\/a> and agree that your clicks, interactions, and personal information may be collected, recorded, and\/or stored by us and social media and other third-party partners in accordance with our Privacy Policy.<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"The Federal Reserve voted Sept. 17 to cut the federal funds rate by one quarter of a percentage…\n","protected":false},"author":3,"featured_media":261062,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[64,79,60638,4329,67,132,68],"class_list":{"0":"post-261061","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-homes-for-sale","11":"tag-real-estate","12":"tag-united-states","13":"tag-unitedstates","14":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115281502815809113","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/261061","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=261061"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/261061\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/261062"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=261061"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=261061"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=261061"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}