The Federal Reserve (Fed) meets this week

There is a high probability that the federal funds rate will be reduced, with a 92% chance of a 25 basis point cut and only an 8% chance of a 50 basis point cut. Although this rate does not directly determine mortgage rates, it does influence the overall cost of borrowing and can determine the direction mortgage rates will take in the future. Financial markets have already anticipated this move, meaning much of the impact is already reflected in current rates.

In fact, mortgage rates have begun to decline since the weak job reports of August 1 and September 5.

Investors interpreted this data as signs of an imminent Fed taper. If the cut is 25 basis points, there likely won’t be a significant drop in mortgage rates. However, if the Fed surprises with a 50-point cut, we could see a more pronounced decline in financing costs for homebuyers.

Looking ahead, many experts believe the Fed could make more than one cut before the end of the year.

Especially if the economy continues to cool. According to Sam Williamson, senior economist at First American, this could improve housing affordability and stimulate market demand. However, everything will depend on how the economy evolves: any unexpected inflation data or abrupt changes could alter expectations. In short, while mortgage rates won’t drop dramatically immediately, they could continue to trend downward if the cycle of downsizing continues.

Rate cut probabilities for the September 2025 Fed meeting

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Broker Associate
C5 | EXP Realty