Mortgage Rate Cuts as Fed Decision Looms

This week has brought a wave of optimism for homebuyers and real estate investors, as mortgage rates continue their downward trend ahead of a highly anticipated Federal Reserve interest rate decision. The average 30-year fixed mortgage rate dropped to 6.13%—its lowest level since late 2022.

This marks a significant shift from the highs seen earlier this year and reflects growing confidence in a softer monetary policy stance.

The Federal Reserve is widely expected to announce a quarter-point rate cut tomorrow, September 18, following its two-day policy meeting. Market indicators like the CME FedWatch tool show a 94–96% probability of a 0.25% reduction in the federal funds rate, with a slim chance of a more aggressive half-point cut. This would be the Fed’s first rate cut of 2025, aimed at countering a weakening labor market and persistent inflation pressures.

Mortgage rates have already responded to these expectations. Lenders, anticipating the Fed’s move, have begun lowering rates preemptively to stay competitive. This proactive adjustment has led to a steady decline in mortgage rates over the past several weeks, with some lenders offering rates even lower than the national average.

However, experts caution that the impact of the Fed’s decision may not be immediate or dramatic. Mortgage rates are more closely tied to long-term Treasury yields—particularly the 10-year note—which have remained relatively stable

If the Fed signals a slower pace of future cuts or inflation remains sticky, mortgage rates could stabilize or even rise again.

For buyers, this week presents a strategic window to lock in favorable rates before the market adjusts. Whether you're refinancing or purchasing, now may be the time to act.

Stay tuned for tomorrow’s Fed announcement—it could shape the mortgage landscape for the rest of the year.

Sources: CBSNews & CNBC