It’s September, and everyone’s buzzing about what the Federal Reserve (the Fed) might do next. With inflation cooling down and the job market losing a little steam, the big talk is about whether the Fed will cut the Federal Funds Rate at their upcoming meeting. And according to Mark Zandi, Chief Economist at Moody’s Analytics:
“They’re ready to cut, just as long as we don’t get an inflation surprise between now and September, which we won’t.”
But what does all this mean for the housing market? And more importantly, what does it mean for you as someone thinking about buying or selling a home?
Why a Federal Funds Rate Cut Matters
First off, let’s break down why this rate cut is a big deal. The Federal Funds Rate is a major player when it comes to what happens with mortgage rates, although it’s not the only factor. Things like the economy, global events, and overall market vibes also come into play.
When the Fed decides to lower the Federal Funds Rate, it sends a signal that the broader economy is cooling off, and mortgage rates often follow suit. Now, a single cut won’t suddenly make mortgage rates plummet, but it can help continue the gradual decline we’ve already started to see.
Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), explains:
“Once the Fed kicks off a rate-cutting cycle, we do expect that mortgage rates will move somewhat lower.”
And here’s the kicker: this upcoming rate cut likely won’t be a one-time thing. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:
“Generally, the rate-cutting cycle is not one-and-done. Six to eight rounds of rate cuts all through 2025 look likely.”
The Expected Impact on Mortgage Rates
So, what’s the deal with mortgage rates through 2025? Experts from Fannie Mae, MBA, NAR, and Wells Fargo are all forecasting that mortgage rates will continue to inch downward, thanks in part to the Fed’s upcoming cuts.
While this decline isn’t expected to be drastic, it’s still good news, especially for both buyers and sellers. Here’s why:
- Easing the Lock-In Effect
For current homeowners, lower mortgage rates might help soften the “lock-in” effect. This happens when homeowners feel stuck in their current home because today’s mortgage rates are higher than what they locked in when they first bought the house. If you’ve been avoiding selling your home because of the fear of losing your sweet low mortgage rate, a small rate drop could make the idea of selling a bit more tempting.
That said, don’t expect a flood of sellers to hit the market overnight. Some homeowners might still be hesitant to give up their locked-in low rate.
- Boosting Buyer Activity
On the flip side, potential homebuyers are going to love lower mortgage rates. As rates dip, the overall cost of owning a home goes down, making it more affordable for folks who’ve been waiting on the sidelines to jump into the market. If you’ve been holding out for better conditions, this could be your chance.
What Should You Do?
While the Fed’s upcoming rate cut won’t magically drop mortgage rates to record lows, it’s likely to help keep them on a steady decline. That’s a win for buyers and sellers alike.
But here’s the thing—waiting for the perfect time to jump into the housing market is a gamble. As Jacob Channel, Senior Economist at LendingTree, puts it:
“Timing the market is basically impossible. If you’re always waiting for perfect market conditions, you’re going to be waiting forever. Buy now only if it’s a good idea for you.”
Bottom Line
With inflation cooling off and job growth slowing, a Federal Funds Rate cut is on the horizon, and that’s likely to give mortgage rates a gentle push in the right direction. While this shift won’t be earth-shattering, it’s still a positive step that could unlock opportunities for you. If you’ve been thinking about buying or selling, let’s chat! That way, you’ll be ready to make your move when the time is right for you.
