Written by: Internal Analysis & Opinion Writers
As September unfolds, anticipation is building around the Federal Reserve’s likely decision to implement its first rate cut of 2025. The expected 25-basis-point reduction would bring the federal funds rate down to a target range of 4.00%–4.25%. But despite the headlines, homebuyers shouldn’t expect mortgage rates to fall dramatically in response.
Mortgage rates have already priced in much of what the Fed is expected to do. Many lenders anticipated the potential cut weeks in advance, meaning today’s advertised mortgage rates may remain largely unchanged even after the announcement. Some lenders may have room to lower rates slightly, but any drop is expected to be minimal.
This dynamic often surprises borrowers, who assume mortgage rates move in lockstep with the Fed’s benchmark rate. In truth, mortgage pricing is more closely tied to the 10-year Treasury yield, long-term inflation forecasts, and investor sentiment. These indicators tend to react to broader economic trends—not just Fed decisions.
For those looking to secure a lower mortgage rate, it’s still essential to shop around. While average rates may not fall substantially, individual lenders vary in how they adjust pricing. Borrowers with strong credit scores, stable income, and low debt-to-income ratios will always be in a better position to negotiate better terms.
Even if the Fed begins a cycle of cuts, experts caution that mortgage rates are unlikely to revisit the historic lows of 2020 and 2021. A single quarter-point move won’t meaningfully shift the landscape. For a more significant rate drop, multiple cuts or a prolonged decline in bond yields would likely be required.
Until then, buyers and refinancers should focus on what they can control—credit health, loan type selection, and timing their rate lock. The Fed may offer a nudge, but borrowers themselves still hold the most powerful tools to improve affordability.
