As the Federal Reserve gears up for a potential rate cut, many buyers and sellers are wondering: will mortgage rates finally ease up? Let’s break down what’s happening—and what it could mean for your next move in the housing market.
📉 The Fed Doesn’t Directly Control Mortgage Rates
Contrary to popular belief, the Federal Funds Rate isn’t the same as mortgage rates. It’s the short-term interest rate banks charge each other. But here’s the twist: mortgage rates often respond to what markets expect the Fed to do—before the Fed even makes a move.
🔍 What’s Already Priced In?
Markets have been anticipating a 25-basis point cut, especially after recent job reports signaled economic cooling. That expectation has already nudged mortgage rates slightly lower. So if the Fed sticks to the expected small cut, don’t expect a dramatic drop in mortgage rates. But if they surprise with a larger cut—say, 50 basis points—rates could dip further.
🕰️ What’s Next for Mortgage Rates?
Experts believe the Fed may cut rates more than once before year-end. If that happens—or even if investors believe it will—mortgage rates could trend lower in late 2025 and into 2026. As Sam Williamson, Senior Economist at First American, puts it:
“Investor confidence in a forthcoming rate-cutting cycle could help push borrowing costs lower... offering some relief to housing affordability and potentially helping to boost buyer demand.”
💡 What This Means for You
If you’ve been waiting for the “perfect” time to buy, this could be your window to strategize. Even small rate changes can significantly impact affordability. Whether you're a first-time buyer or planning your next investment, understanding the economic signals helps you make smarter decisions.
Source: www.keepingcurrentmatters.com
