What a Fed Rate Cut Could Mean for Mortgage Rates

The Federal Reserve (the Fed) meets this week, and expectations are high that they’ll cut the Federal Funds Rate. But does that mean mortgage rates will drop? Let’s clear up the confusion.

The Fed Doesn’t Directly Set Mortgage Rates

Right now, all eyes are on the Fed. Most economists expect they'll cut the Federal Funds Rate at their mid-September meeting to try to head off a potential recession.

According to the CME FedWatch Tool, markets are already betting on it. There’s virtually a 100% chance of a September cut. And based on what we know now, there’s about a 92% chance it’ll be a small cut (25 basis points) and an 8% chance it will be a bigger cut (50 basis points):

So, what exactly is the Federal Funds Rate? It’s the short-term interest rate banks charge each other. It impacts borrowing costs across the economy, but it’s not the same thing as mortgage rates. Still, the Fed’s actions can shape the direction mortgage rates take next.

Why Markets Already Saw This Cut Coming

Here’s the part that may surprise you. Mortgage rates tend to respond to what the financial markets think the Fed will do, before the Fed officially acts. Basically, when markets anticipate a Fed cut, that outlook gets priced into mortgage rates ahead of time.

That’s exactly what happened after weaker-than-expected jobs reports on August 1 and September 5. Each time, mortgage rates ticked down as financial markets grew more confident a cut was coming soon. And even though inflation rose slightly in the latest CPI report, the Fed is still expected to make a cut.

So, if the Fed goes with a 25-basis point cut, as expected, that’s likely already baked in to current mortgage rates, and we may not see a dramatic drop.

But if they go bigger and drop their Federal Funds Rate by 50 basis points instead, mortgage rates could come down more than they already have.

So, Where Do Mortgage Rates Go from Here?

While the upcoming cut may not move the needle much, many experts expect the Fed could cut the Federal Funds Rate more than once before the end of the year. Of course, that’s if the economy continues to cool (see graph below):

As Sam Williamson, Senior Economist at First American, explains:

“For mortgage rates, investor confidence in a forthcoming rate-cutting cycle could help push borrowing costs lower in the back half of 2025, offering some relief to housing affordability and potentially helping to boost buyer demand and overall market activity.”

If multiple rate cuts happen, or even if markets just believe they will, mortgage rates could ease further in the months ahead. But here’s the catch – all of this depends on how the economy evolves. Surprise inflation data or unexpected shifts could quickly change the outlook.

Bottom Line

Mortgage rates likely won’t drop sharply overnight, and they won’t mirror the Fed’s moves one-for-one. But if the Fed begins a rate-cutting cycle, and markets continue to expect it, mortgage rates could trend lower later this year and into 2026.

If you’ve been waiting and watching the housing market, now’s the time to talk strategy. Even small changes in rates can make a meaningful difference in affordability, and understanding what’s ahead helps you make the best decision for your situation.

Why 50% of Homes Are Selling for Under Asking and How To Avoid It

If your selling strategy still assumes you’ll get multiple offers over asking, it’s officially time for a reset. That frenzied seller’s market is behind us. And here are the numbers to prove it. 

From Frenzy to “Normal”

Right now, about 50% of homes on the market are selling for less than their asking price, according to the latest data from Cotality.

But that isn’t necessarily bad news, even if it feels like it. Here’s why. The wild run-up over the last few years was never going to be sustainable. The housing market needed a reset, and data shows that’s exactly what’s happening right now.

The graph below uses data from Zillow to show how this trend has shifted over time. Here’s what it tells us:

• 2018–2019: 50–55% of homes sold under asking. That was the norm.
• 2021–2022: Only 25% sold under asking, thanks to record-low rates and intense buyer demand.
• 2025: 50% of homes are selling below asking. That’s much closer to what’s typical in the housing market.

Why This Matters If You’re Selling Your House

In this return to normal, your pricing strategy is more important than ever.

A few years ago, you could overprice your house and still get swarmed with offers. But now, buyers have more options, tighter budgets, and less urgency.

Today, your asking price can be make or break for your sale, especially right out of the gate. Your first two weeks on the market are the most important window because that’s when the most serious buyers are paying attention to your listing. Miss your price during that crucial period, and your sale will grind to a halt. Buyers will look right past it. And once your listing sits long enough to go stale, it’ll be hard to sell for your asking price.

The Ideal Formula

Basically, sellers who cling to outdated expectations end up dealing with price cuts, lower offers, and a longer time just sitting on the market. But homeowners who understand what's happening are still winning, even today.

Because that stat about 50% of homes selling for under asking also means the other half are selling at or above – as long as they're priced right from the start.

So, how do you set yourself up for success? Do these 3 things:

1. Prep your house. Tackle essential repairs and touch-ups before you list. If your house looks great, you’ll have a better chance to sell at (or over) your asking price.
2. Price strategically from day one. Don’t rely on what nearby homes are listed for. Lean on your agent for what they’ve actually sold for. And price your house based on that.
3. Stay flexible. Be ready to negotiate. And know that it doesn't always have to be on price. It may be on repairs, closing costs, or some other detail. But know this: today’s serious buyers expect some give-and-take.

If you want your house to be one that sells for at (or even more than) your asking price, it’s time to plan for the market you’re in today – not the one we saw a few years ago. And that’s exactly why you need a stand-out local agent.

Bottom Line

You don’t want to fall behind in this market.

So, let's talk about what buyers in our area are paying right now. With local expertise and a strategy that gets your house noticed in those crucial first two weeks, anything is possible.

Want to know what your house would sell for?

Mortgage Rates Just Saw Their Biggest Drop in a Year

You’ve been waiting for what feels like forever for mortgage rates to finally budge. And last week, they did – in a big way.

On Friday, September 5^th, the average 30-year fixed mortgage rate fell to the lowest level since October 2024. It was the biggest one-day decline in over a year.

What Sparked the Drop?

According to Mortgage News Daily, this was a reaction to the August jobs report, which came out weaker-than-expected for a second month in a row. That sent signals across the financial markets, and then mortgage rates came down as a result.

Basically, we're seeing signs the economy may be slowing down, and as certainty grows in the direction the economy is going, the markets are reacting to what is likely ahead. That historically brings mortgage rates down.

Why Buyers Should Pay Attention Now

But this isn’t just about one day of headlines or one report. It’s about what the drop means for you.

This recent change saves you money when you buy a home. The chart below shows you an example of what a monthly mortgage payment (principal and interest) would be at 7% (where mortgage rates were in May) versus where rates roughly are now:

Compared to just 4 months ago, your future monthly payment would be almost $200 less per month. That’s close to $2,400 a year in savings.

How Long Will It Last?

That really depends on where the economy and inflation go from here. Rates could drop lower, or they could inch up slightly. 

So, make sure you’re connected with a good agent and trusted lender. They’ll keep a close eye on inflation indicators, job market updates, and reactions to upcoming Fed policy to gauge where mortgage rates may go from here.

But for now, focus on this. While no one can say for sure where rates are headed, the fact that rates broke out of their months-long rut is a good thing. If you’ve been feeling stuck, this could make the start of a new chapter. As Diana Olick, Senior Real Estate and Climate Correspondent at CNBC, says:

“Rates are finally breaking out of the high 6% range, where they’ve been stuck for months.” 

And that’s gives you more reason to hope than you've had in quite some time.

Bottom Line

This is the shift you’ve been waiting for.

Mortgage rates just saw their biggest decline in over a year. And if rates stay near this level, it could make a home you couldn’t afford just a few months ago feel possible again.

What would today’s rates save you on your future monthly payment? Let’s connect so you can find out.