The Federal Reserve’s upcoming September 16–17 policy meeting is shaping up to be one of the most closely watched in years. With inflation holding in June and July, and the labor market showing signs of softening, analysts and markets alike are betting that the Fed may finally begin trimming interest rates after holding them steady for much of 2024 and early 2025. But what would a cut actually mean for borrowers—especially those with mortgages, or if you’re looking to buy a home?
A growing case for a September rate cut.
Several of the world’s largest banks, including Barclays, BNP Paribas, and Deutsche Bank, now expect the Fed to lower rates by 25 basis points in September, with another cut potentially on the horizon before year-end. A basis point is a unit of measure equal to 1/100th of one percent (0.01%). If the Fed were to lower rates by 25 basis points (0.25%), a 4.00% interest rate would change to 3.75%.
Fed Chair Jerome Powell’s recent speech at the annual Jackson Hole, Wyoming, conference in August signaled a shift toward a more accommodative stance, highlighting concerns over slowing job growth and easing inflation. Still, Powell emphasized caution, making clear that the Fed’s decision will hinge on upcoming data, particularly the August jobs report and inflation readings.
Immediate impact for mortgages: Adjustable vs. fixed-rate mortgages.
If the Fed cuts rates, the most immediate relief will be felt by borrowers with adjustable-rate mortgages (ARMs) and other loans tied directly to short-term interest rates. Monthly payments could decline modestly, providing breathing room if you’ve been squeezed by years of elevated borrowing costs.
However, if you’re eyeing a 30-year fixed-rate mortgage, the story is more complex. Fixed rates are influenced more by long-term bond yields, particularly the 10-year Treasury, than by the Fed’s short-term benchmark. While a rate cut could nudge yields lower, other factors—like investor demand for bonds and broader economic conditions—will play an equally important role.
Mortgage rates: Don’t expect a freefall.
Mortgage rates have already eased slightly in recent weeks, with the average 30-year fixed rate dipping to about 6.58%, its lowest level in nearly 10 months.* But analysts caution that even with Fed cuts, rates are unlikely to tumble back to the ultra-low levels seen during the pandemic.
Most forecasts expect fixed mortgage rates to remain in the mid-6% range through the end of 2025, barring a sharp economic downturn.** That means if you’re shopping for a home, you may see only a modest decline in interest rates, not a dramatic shift.
Housing market dynamics.
Lower rates could stimulate more activity in the housing market, spurring demand from both first-time home buyers and homeowners looking to refinance. But with housing supply still constrained in many parts of the country, increased demand may also translate into rising home prices. In high-demand markets like California, a small drop in rates could trigger bidding wars rather than significant affordability gains.
Final thoughts.
Lower rates could stimulate more activity in the housing market, spurring demand from both first-time buyers and homeowners looking to refinance. But interest rates are only part of the picture when it comes to buying or selling a home. Buyers still need to plan for appraisal fees, loan origination charges, title insurance, and closing costs that can add thousands to the transaction. Sellers face their own expenses, including agent commissions and transfer taxes. Navigating these added costs is just as important as securing the right rate. Our mortgage specialists can walk you through the full picture—helping you understand fees, compare options, and avoid surprises—so you can make a confident, well-informed decisions about one of life’s biggest financial commitments.
Whether you’re thinking about selling a home or shopping for a new one, we can help. Not only do we offer competitive rates and exceptional service, but our Home Rewards program makes the process more affordable and less stressful:
- Sell your home for a flat 1.5% listing fee, which could save you thousands†
- Buy a home and earn a 20% real estate rebate‡
- Plus, get help searching for a home, connecting with a trusted real estate agent, and accessing exclusive discounts.
These benefits, combined with expert financial guidance, give you more than just a good rate—they provide peace of mind at every step of the journey. To get our latest mortgage rates, or for our free mortgage checkup, call 800.877.2345 to connect with one of our mortgage professionals today.
*, ** Veiga, Alex, “Average rate on a 30-year mortgage holds steady at lowest level in nearly 10 months,” AP News.com. Published 21 August 2025. Accessed 25 August 2025.
†Does not include commission owed to Buyer’s Agent
‡Rebate payment is made by HomeSmart Evergreen Realty and is credited to your benefit at the close of transaction. Rebate for home purchase only is 20%. HomeSmart Evergreen Realty is not affiliated with Farmers Insurance Federal Credit Union. Commission Rebates are not allowed in the following states: Alabama, Alaska, Iowa, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon and Tennessee.
20% escrow services discount guaranty paid by Escrow Options at the close of transaction. Escrow Options is not affiliated with Farmers Insurance Federal Credit Union.
