The recent interest rate cut by the Federal Reserve is not going to immediately lower mortgage payments for homeowners. However, it may pave the way for more affordable borrowing, as mortgage rates are expected to drop to their lowest levels in over a year, according to Freddie Mac.
On Wednesday, the Fed lowered its key federal funds rate by a quarter percentage point, bringing it to a range of 3.75% to 4%. This marks the second consecutive decrease this year and is the first instance the rate has fallen below 4% since 2022.
Officials pointed to concerns about a softening job market and the ongoing government shutdown, which has interrupted key economic reports.
Experts in finance suggest that a quarter-point reduction is unlikely to lead to an immediate shift in long-term mortgage rates since the Fed’s policy rate doesn’t directly influence these rates.
William T. Chittenden, dean and CEO of the South Wales Graduate School of Banking at SMU Cox School of Business, noted that there isn’t a direct correlation between the federal funds rate and the 30-year mortgage rate.
The average interest rate for a 30-year fixed-rate mortgage was recorded at 6.19% as of October 23, which is the lowest in over a year and nearly a full percentage point lower than it was in early 2025, as indicated by Freddie Mac’s Primary Mortgage Market Study.
The 15-year fixed interest rate has also decreased to 5.44%.
Over the past month, 30-year rates have averaged 6.28%, while the yearly average stands at 6.7%. For 15-year fixed rates, monthly averages are around 5.51%, marking the most favorable rates since mid-2024, according to Freddie Mac.
Melissa Cohn, a regional vice president at William Rabeis Mortgage, mentioned that the initial response in the bond market has been subdued, with mortgage rates remaining stable.
Nevertheless, she added that if bond yields keep declining, mortgage rates might also continue to drop.
This latest rate cut follows weeks of public pressure from President Trump, who has openly criticized Fed Chairman Jerome Powell for being too hesitant in adjusting policies. Speaking in South Korea, Trump labeled him “Powell Too Late” and urged for more cuts to stimulate growth.
As for inflation, it was recorded at 3% in September, which was slightly lower than anticipated, potentially opening the door for further interest rate reductions.
However, the White House has cautioned that the ongoing government shutdown could delay important economic reports that the Fed relies on for future guidance, like October’s Consumer Price Index.
Currently, mortgage lenders are closely monitoring how the market responds to the Fed’s decisions.
If investors continue to speculate on additional rate cuts, the yield on the 10-year Treasury note—often tracking mortgage prices closely—could drop further, possibly easing borrowing costs over time, according to Freddie Mac economists.
Ted Jenkin, managing partner at Exit Wealth Advisors, stated that homeowners likely won’t feel immediate effects from the Fed’s actions, but anticipation of further cuts could pressure both 15- and 30-year mortgage rates downward.
Yuval Golan, CEO of the real estate finance platform Waltz, highlighted that this timing could prove crucial for real estate investors. He described the rate cut as “particularly advantageous” for investors aiming to refinance or acquire properties at more attractive prices during sluggish selling periods. He also mentioned that international investors, often immune to seasonal property cycles, might capitalize on these lower rates.
