Did the feds cut rates

What does the Feds cutting rates mean for mortgage interest rates

9/17/20252 min read

black blue and yellow textile
black blue and yellow textile

Yes — the Fed just cut its benchmark (federal funds) rate by 25 basis points, bringing it down to a target range of 4.00%–4.25%. Financial Times+3Investopedia+3CBS News+3

For ZIP code 92647 (Huntington Beach, Orange County, CA), a reasonable estimate for a 30-year fixed mortgage rate is about 6.00%–6.25% (APR slightly higher depending on points, credit, down payment).

What we do know

  • The Fed just cut the benchmark (federal funds) rate by 25 basis points, to 4.00%-4.25%. AP News+2Reuters+2

  • Fed projections (“dot plot”) indicate they expect two more quarter-point cuts before the end of 2025. Reuters+2AP News+2

  • The Fed is concerned that the labor market is weakening and that economic activity has moderated, which pushes in favor of easing. Reuters+2Reuters+2

  • What might prevent rates from falling more or quickly

    Even though the Fed wants to cut more, several risks could slow or offset rate reductions:

    1. Inflation persistence — Prices (especially in some service sectors, import costs, energy, etc.) may stay elevated or rebound, which could force the Fed to hold rates higher for longer. Business Insider+2PBS+2

    2. Bond market / Treasury yields — Mortgage and long-term interest rates don’t directly follow the Fed funds rate. They’re heavily influenced by what investors expect for inflation, growth, and what long-term Treasury yields do. If yields stay high (or rise), that keeps mortgage rates up. Scotsman Guide+2The Mortgage Reports+2

    3. Economic surprises — If growth remains stronger than expected, or there are supply shocks (oil, energy, commodity issues, trade disruptions), the Fed may delay cuts or even reverse course. Also, if unemployment stays low or tight, the Fed may worry cutting too fast.

    4. Lagged effects — Even when the Fed cuts rates, it takes time for that to ripple through mortgages, auto loans, etc. Many rates are “sticky” due to existing debt, lending spreads, risk premiums, etc.

      What analysts expect

      • Many economists and Fed officials expect two more rate cuts this calendar year. Reuters+2AP News+2

      • Mortgage rates are expected to see “gradual downward pressure,” but big drops are unlikely without inflation cooling more dramatically and long-term yields falling. The Mortgage Reports+2Scotsman Guide+2

      Bottom line

      So: yes — the recent Fed cut raises the odds that interest rates (at least short-term and maybe some long-term borrowing like mortgages) will fall by the end of 2025. But the magnitude of any drop is uncertain, and many “ifs” need to go right (inflation cooling, economic slowing without collapsing, bond yields behaving, etc.).

      If you want to know more information on a home Mortgage you can reach out to AMIE HERRERA

      with HOMEOWNERS FIRST she is a senior loan officer 562-652-2089

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