What The Fed Rate Cut Could Mean For Mortgage Rates & The Housing Market

House hunters, now's the time to lock in the best mortgage interest rate we've seen in nearly a year. If you're shopping for a new-to-you abode or a new construction home, mortgage rates are expected to dip in accordance with the federal interest rate cut. The Federal Open Market Committee (FOMC) just agreed to lower interest rates to between 4.0% and 4.25%, and this has spurred a corresponding dip in mortgage rates. Market conditions are among the most important factors to identify before buying a home. With mortgage rates now below 6.5% for the first time in just shy of a year, borrowers have the opportunity to secure lower monthly mortgage payments. Mortgage holders hoping to refinance at a lower rate also stand to benefit from this development.

However, this change has the potential to be fickle. Once the FOMC lowers interest rates, people tend to anticipate that mortgage rates will continue to trend downward. This is not necessarily the case; the FOMC doesn't set mortgage rates, and they are subject to changes if inflation and unemployment rise. In short, don't hold your breath that you may get an even lower interest rate on your mortgage. Most economists estimate that mortgage rates will stay above 6.5% for the remainder of 2025.

The "for sale" sign moldering on your neighbors' lawn illustrates the job uncertainty and interest rate concerns that have kept potential homebuyers from investing in a new home. As a result, homes are lingering on the market as well as going through price cuts to attract buyers.

While mortgage interest rates in the 6% range are an improvement over the 7.44% high point in 2024, the current rate is still higher than last year's low of 6.08%. If that rate wasn't enough to kindle a homebuying trend, it may not do much this year, either. However, some eager purchasers who can not wait may choose to get a mortgage now and refinance later.

A potentially bigger factor in the housing market is that a majority of homeowners were able to get financing at much lower rates than the current ones in years past. This makes them loath to sell, knowing that a new mortgage will cost them more.