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The Federal Reserve cut its key interest rate for the second time this year on Wednesday in a move that experts say could lead to lower mortgage rates before the end of the year; however, much depends on what happens with the U.S. economy in the coming months. “The initial reaction in bonds is muted, and mortgage rates are steady,” Melissa Cohn, the regional vice president of William Raveis Mortgage and a 43-year mortgage industry veteran, said in a statement shared with Newsweek. That could change before the end of the year, she added, saying, “Mortgage rates could keep falling.” What Do We Know About the Fed’s Decision? The U.S. central bank cut interest rates by a quarter of a percentage point to a range of 3.75 percent to 4 percent on Wednesday, as was widely expected. It did so with less information about the state of the U.S. economy than usual, as key reports have been delayed by the ongoing federal government shutdown. “We’re going to collect every scrap of data we can find, evaluate it and think carefully about it. And that’s our job,” Fed Chair Jerome Powell told reporters during a news conference on Wednesday. The government shutdown, which began on October 1, is now stretching into its second month. This lack of information—together with uncertainty surrounding the future of the U.S. economy—has cast doubt over whether the Fed will cut rates one more time before the end of the year. Federal Reserve Chair Jerome Powell speaks during a news conference following a meeting of the Federal Open Market Committee at the Federal Reserve on October 29 in Washington, D.C. Already on Wednesday, division was seeping among the Fed board members over their approach to monetary policy, with Powell speaking of “a growing chorus now of feeling like maybe this is where we should at least wait a cycle” before cutting rates again. The next Fed meeting is “six weeks away, so we don’t know what we are going to get,” Powell said on Wednesday. What Is Happening With Mortgage Rates Now? For much of the year, the average 30-year fixed-rate mortgage—the most popular form of home loan among Americans—had lingered between 6.5 percent and 7 percent, hovering near the peaks reached after the Fed began its aggressive-rate hiking campaign in 2022. In late August and early September, the rate began to fall in anticipation of a widely expected decision by the Fed to cut its key interest rate for the first time since December 2024. As of the week ending October 23, the average 30-year fixed-rate mortgage stood at 6.19 percent, down 0.35 percentage points from a year earlier and much below the monthly average of 6.28 percent, according to Freddie Mac. This was “the lowest level since early October 2024 and down roughly 50 basis points from midsummer,” Realtor.com senior economist Jake Krimmel said in a statement shared with Newsweek. How Is the Fed’s Latest Decision Likely to Affect Mortgage Rates? While Cohn believed mortgage rates could continue falling by the end of the year, an expectation she shared with mortgage giants Fannie Mae and Freddie Mac, other experts were more skeptical. Krimmel warned that further declines in mortgage rates “may be harder to come by,” he said. “The upcoming cut is already priced in, while uncertainty over a potential December move, stubborn budget deficits, and lingering inflation expectations continue to limit how far mortgage rates could fall.” Realtor.com chief economist Danielle Hale said that mortgage rates were “not likely to move too much lower from their current position, just above 6 percent, absent surprisingly slower economic activity.” Despite these mixed expectations, this is still as good a time as it comes for Americans squeezed by long-standing affordability challenges, including high borrowing costs, to buy a home. “For housing, the timing presents a window of opportunity,” Krimmel said. “Rates have eased steadily throughout the ‘Best Time to Buy’ season, offering buyers and refinancers welcome savings and some breathing room as inventory climbs and buyers gain leverage. Existing home sales have already picked up as a result.” “While affordability remains a challenge, borrowers still have meaningful control over the rate they lock in through credit, loan type, and down payment decisions,” Krimmel continued. “Looking forward, a sustained housing market pickup hinges on lower mortgage rates with narrowing spreads, inventory building enough to meaningfully ease price pressures, and the return of a labor market dynamic enough to overcome any residual economic uncertainty.” Bright MLS chief economist Lisa Sturtevant, however, warned that things could turn for the worst in the coming months when it comes to housing and borrowing costs—so willing homebuyers should not wait much longer. “As we approach the end of the year, listing activity tends to slow and would-be sellers decide to wait until a...
