Housing expert reveals major mortgage rate prediction amid Fed rate cut

18 Sep 2025, 22:03 · The Fresno Bee

Rising home prices and limited housing inventory have weakened homebuyer demand over the past few years, preventing buyers from entering the housing market and deterring sellers from listing their homes. This housing standoff has compounded the market's stagnation and dampened expectations for a swift rebound.

Economists initially expected mortgage rates to ease alongside several rounds of interest rate cuts from the Fed last year, but ongoing economic uncertainty and market volatility have rattled the housing sector.

Mortgage rates are now expected to close out 2025 at levels similar to those seen at the end of 2024, delaying the long-awaited housing market rebound.

The Fed announced a highly anticipated interest rate cut yesterday, bringing relief to consumers, financial markets, and homebuyers.

While lowering the Federal Funds Rate will reduce borrowing costs, homebuyers may see less of a direct impact.

Lower interest rates typically improve consumer confidence and homebuyer sentiment, but mortgage rates falling hinges on a few other factors - particularly the 10-year Treasury yield and bonds market performance.

Rocket Mortgage Chief Business Officer Bill Banfield notes that homebuyers may see mortgage rate improvements, but warns against waiting out the market in hopes of better rates.

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Fed interest rate cut will improve conditions for homebuyers with adjustable-rate mortgages

Mortgage rates are often one of the most influential factors when prospective homebuyers decide to purchase a home.

Though there is always the option to refinance down the road, the fixed rate that mortgage borrowers are locked into shapes their monthly mortgage payments and overall loan balance.

Many Millennial and Gen Z homebuyers note that mortgage rates dropping to just below 6% would improve conditions enough to allow them to buy a home.

Rocket Mortgage Chief Business Officer Bill Banfield notes that the Fed's recent rate cut is an indication that economic conditions are weakening enough to warrant Fed intervention.

More on homebuying:

"The Fed's 25-basis-point cut reflects their recognition that employment is weakening and inflation remains above the Fed's goal of two percent. This move helps bring monetary policy back toward neutral, supporting growth without overheating the economy," Banfield said in a statement to The Street.

However, he highlights that adjustable-rate mortgages will see immediate positive shifts, while fixed-rate mortgage rates will likely remain unchanged.

"Mortgage rates may stay relatively flat in the short term since markets had already priced in this cut. However, consumers could benefit from lower short-term rates, making adjustable-rate mortgages – which closely follow the Fed's moves – more attractive. For consumers, it's another signal that the cost of borrowing is gradually moving lower."

Fixed-rate mortgages are tied to long-term benchmarks like the 10-year Treasury yield. To lower bond yields, a combination of factors must be improved, including reduced inflation, a lower federal budget deficit, and increased bond market demand.

Homebuyers trying to wait out the housing market risk losing competitive mortgage rates

Many would-be homebuyers have found it difficult to balance saving for a down payment, planning for retirement, and managing the rising cost of living. Many have deferred homeownership until housing market conditions improve, and are saving for a down payment in the interim.

While delaying homeownership to save for a down payment is a sound financial move, Banfield warns that those who are waiting to buy a home solely to time the market may be making a mistake.

"Mortgage rates are forward-looking, and by the time the Fed announces a cut, markets have usually already priced it in. That means waiting for the official news doesn't guarantee a better deal," he explained. "Often, it means the best moment has already passed."

Markets have been awaiting a Fed rate cut all year, and the August Fed meeting strongly hinted at a September update, allowing markets and lenders to plan accordingly. In this market, waiting for a rate cut may not be an effective strategy.

"The rates available now already reflect expectations of a 25-basis-point cut, with the potential for more down the road," Banfield added.

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This story was originally published September 18, 2025 at 3:03 PM.