The Federal Reserve cut its benchmark rate by 0.25% today, lowering the target range to 4.00%–4.25% — the first cut of 2025. The move comes amid signs of a cooling job market and slower inflation progress, and it’s raising big questions about what this means for housing.
Mortgage Rates Are Drifting Lower
Rates on 30-year fixed mortgages averaged 6.35% as of Sept. 11 (Freddie Mac), down from 6.5% the week before, though still above 6.2% a year ago. Economists expect them to trend toward the 6% range by year-end, but remain above that threshold.
Unlike the Fed’s benchmark rate, mortgage rates are tied more closely to the yield on the 10-year Treasury bond, which is influenced by investor sentiment, inflation expectations, and Fed policy signals. That’s why today’s cut may help support lower borrowing costs, but it isn’t a one-to-one effect.
What It Means for Borrowers
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Buyers: A move closer to 6% could reopen affordability for sidelined buyers and stimulate more activity, particularly in the sub-$2M market.
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Luxury: High-end buyers are less rate-sensitive, but psychological shifts toward “cheaper money” could fuel urgency before rates bounce again.
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Existing Homeowners: Adjustable-rate mortgages and home-equity lines are more directly tied to Fed policy and should see relief within a couple of billing cycles.
Bottom line: Lower rates are a welcome sign, but affordability pressures remain. If rates slip closer to 6%, expect a notable uptick in buyer activity — particularly in NYC neighborhoods where demand has been waiting on the sidelines.
