How Does A Fed Rate Cut Effect Mortgage Rates?
- Charles "Skip" Geiser
- Sep 25
- 8 min read
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.
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Think Your Smart?
Done...What Most Religions Don't Tell You About The Bible
Cary Schmidt's Introduction of Done
Time is short...
God gave His only begotten Son Jesus Christ for us to be saved from this sinful world. Time is at Hand and while it is not too late, secure your salvation.
If you don’t know how to secure salvation, this simple easy to follow “ABCs of Salvation” will guide you on how to accept genuinely Jesus Christ as your Lord and personal Savior to secure salvation for you to surely go to Heaven.
But before going through the steps you might ask: Why do I need to Secure Salvation? And why do I need to go to heaven? This because:
You might be wealthy but it cannot be exchanged for your soul.
Whatever you have here on earth, they are nothing and there is no forever on Earth.
Kingdom of Heaven is more valuable than anything else.
It is appointed that we will die physicaly and we will be judged (Hebrews 9:27).
You only have two destinations: Heaven or Hell
Hell has no exit and Heaven has only one door – Jesus
So how to secure salvation?
A – ADMIT that you are a Sinner
B – BELIEVE on the Lord Jesus Christ
C – CONFESS with your mouth
D – DEPART from evil
A – ADMIT that you are a Sinner
We all have sinned.
17 For if by one man’s offence death reigned by one; much more they which receive abundance of grace and of the gift of righteousness shall reign in life by one, Jesus Christ.) 18 Therefore as by the offence of one judgment came upon all men to condemnation; even so by the righteousness of one the free gift came upon all men unto justification of life.
19 For as by one man’s disobedience many were made sinners, so by the obedience of one shall many be made righteous.
20 Moreover the law entered, that the offence might abound. But where sin abounded, grace did much more abound:
21That as sin hath reigned unto death, even so might grace reign through righteousness unto eternal life by Jesus Christ our Lord.
And no matter how you try to be good, you will still fail.
For all have sinned, and come short of the glory of God;Romans 3:23 KJV
You are still unclean.
But we are all as an unclean thing, and all our righteousnesses are as filthy rags; and we all do fade as a leaf; and our iniquities, like the wind, have taken us away.Isaiah 64:6 KJV
B – BELIEVE on the Lord Jesus Christ
God gave His only begotten Son Jesus Christ to save us. And through His blood, our sins washed away.
For God so loved the world, that he gave his only begotten Son, that whosoever believeth in him should not perish, but have everlasting life.John 3:16 KJV
Only by His grace and not by works.
8 For by grace are ye saved through faith; and that not of yourselves: it is the gift of God: 9 Not of works, lest any man should boast. 10 For we are his workmanship, created in Christ Jesus unto good works, which God hath before ordained that we should walk in them.Ephesians 2:8-10 KJV
There is no other way but only through Jesus Christ alone.
Jesus saith unto him, I am the way, the truth, and the life: no man cometh unto the Father, but by me.John 14:6 KJV
God commended His love toward us.
But God commendeth his love toward us, in that, while we were yet sinners, Christ died for us.Romans 5:8 KJV
If we have Jesus Christ living in us, we will live eternally.
He that hath the Son hath life; and he that hath not the Son of God hath not life.1 John 5:12 KJV
In the power of our Lord Jesus Christ.For I verily, as absent in body, but present in spirit, have judged already, as though I were present, concerning him that hath so done this deed, In the name of our Lord Jesus Christ, when ye are gathered together, and my spirit, with the power of our Lord Jesus Christ, To deliver such an one unto Satan for the destruction of the flesh, that the spirit may be saved in the day of the Lord Jesus.1 Corinthians 5:3-5 KJV
By the blood of our Savior Jesus Christ
Not by works of righteousness which we have done, but according to his mercy he saved us, by the washing of regeneration, and renewing of the Holy Ghost; Which he shed on us abundantly through Jesus Christ our Saviour; That being justified by his grace, we should be made heirs according to the hope of eternal life.Titus 3:5-7 KJV
C – CONFESS with your mouth
Now that you accepted that you are a sinner and believe in the Lord Jesus Christ, confess with your mouth your sins and that you believe in Him. Let Him come to you and accept Him as your Lord and personal Savior.
If we confess our sins, he is faithful and just to forgive us our sins, and to cleanse us from all unrighteousness.1 John 1:9 KJV
9 That if thou shalt confess with thy mouth the Lord Jesus, and shalt believe in thine heart that God hath raised him from the dead, thou shalt be saved. 10 For with the heart man believeth unto righteousness; and with the mouth confession is made unto salvation.11 For the scripture saith, Whosoever believeth on him shall not be ashamed. Romans 10:9-11 KJV
Now do the Sinner’s Prayer:
Holy, thoughtful, gracious, and Heavenly Father, I recognize and acknowledge I am a miscreant not deserving of your grace and I ask forgiveness of my sins. I know your son is the truth the light and the way, I give myself freely to His control and welcome him into my heart. I ask you to walk with me and guide me, teach me your way and your truth. Thank you for the gift of your Son’s sacrifice on the cross that I may live. Thank you for your forgiveness and for accepting me as your child. Amen.
Now that you are saved and you have Jesus Christ living in you, you should not stop there. What is next? Follow Him, His words, submit yourself, and don’t forget to
D – DEPART from evil
This is not part of the step to secure salvation but it is a way of proving yourself that you are now truly of Christ. Forget your past and follow Him.
Depart from evil, and do good; seek peace, and pursue it.Psalms 34:14 KJV
Therefore if any man be in Christ, he is a new creature: old things are passed away; behold, all things are become new.2 Corinthians 5:17 KJV
(For he saith, I have heard thee in a time accepted, and in the day of salvation have I succoured thee: behold, now is the accepted time; behold, now is the day of salvation.) 2 Corinthians 6:2 KJV
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This article provides information and opinions but is not meant as investment advice. Skip Geiser LLC, Charles "Skip" Geiser or Plum Tree Real Estate Marketing does not assure the accuracy or completeness of the information or opinions presented here. It is important to conduct your own research, due diligence, and seek professional advice before making any investment decisions. Skip Geiser LLC, Charles "Skip" Geiser or Plum Tree Real Estate Marketing is not responsible for any loss or damage resulting from relying on the information or opinions in this article.
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