Fed Rate Cut Slashes Mortgage Rates to 11-Month Low
The Federal Reserve has cut its benchmark interest rate, leading to a drop in mortgage rates. The average 30-year fixed rate has fallen to an 11-month low of 6.35%, offering more affordable borrowing for homeowners and buyers. The Fed's rate cut, announced on September 17, 2025, has had a significant indirect influence on mortgage rates. This is primarily due to its impact on the 10-year U.S. Treasury yield and market expectations. While fixed-rate loans may see less direct effects, variable-rate loans like credit cards and home equity lines of credit (HELOCs) have experienced immediate rate drops. The cut, driven by concerns about an economic slowdown and a cooling job market, has brought the target range for the federal funds rate to 4.0% to 4.25%. This has led to a decrease in the average 30-year fixed refinance rate, which had previously risen to 7.01% as of September 20, 2025. However, the updated Fed 'dot plot' suggests only two more cuts this year, which could potentially put upward pressure on rates if future inflation reports are strong. For homebuyers, lower mortgage rates mean enhanced affordability and purchasing power. Sellers may benefit from increased buyer activity and competition. However, the full extent of the Fed's actions on mortgage rates remains to be seen, as fixed-rate loans are less directly affected and future inflation reports could influence rates.
