Federal Reserve Cuts Interest Rates: What It Means for U.S. Mortgage Buyers
Experts explain why mortgage rates may not drop immediately despite the Fed’s long-awaited rate cut.
The Federal Reserve has reduced its benchmark interest rate by a quarter percentage point, marking the first such move in nine months. This long-anticipated decision comes as many Americans struggle with the burden of high borrowing costs.
However, analysts caution that the rate cut will not immediately translate into significantly lower mortgage rates, since financial markets had already priced in the move. Mortgage rates are not directly tied to the Fed’s benchmark rate but are instead influenced by the 10-year Treasury yield, which typically moves in a similar direction.
Recently, mortgage rates dropped to an average of 6.35% for a 30-year fixed loan, the lowest level in several months. While this decline offers some relief, experts note the decrease may remain limited. Long-term factors—such as inflation expectations, demand for mortgage-backed securities, and the overall state of the economy—play a more decisive role.
Mortgage Rates Hover Near 6% as Market Awaits Recovery
Economists predict that rates will hover around 6% in the near future, with minor fluctuations up or down. For buyers, this gradual easing could improve purchasing power and encourage refinancing opportunities for homeowners who bought during peak periods. Still, the broader housing affordability crisis persists, as the average household income remains about $25,000 short of what is needed to buy a median-priced home in today’s market.
According to the National Association of Realtors, mortgage rates settling near 6% could allow an additional 5.5 million families to enter the housing market, potentially increasing home sales by 3% in 2025 and up to 14% in 2026. Yet, experts emphasize that greater affordability must be matched with higher housing supply—especially in the price ranges with the strongest demand.
The association’s data shows that the housing inventory reached 1.55 million units, the highest level since 2020. Analysts believe that this rise in available homes, coupled with lower rates, could bring more flexibility to the market, giving buyers wider choices while allowing sellers with expensive mortgages to re-list and move into new properties.
