Fed Set to Cut Rates, Mortgage Costs Dip Ahead of Decision

Lead: The U.S. Federal Reserve is poised to cut its benchmark federal funds rate by 25 basis points to 4.00%-4.25% today, prompting average 30-year mortgage rates to fall to 6.13%.

Nut Graf: With a 96% probability of a rate cut priced in by markets, lenders have already trimmed mortgage rates, offering relief to homebuyers and refinancers as the Fed aims to bolster a slowing labor market and reinvigorate economic growth.

Fed Readies First Rate Cut of 2025

• The Federal Open Market Committee will announce its decision at 2 p.m. EST today, marking its first reduction since December 2024.
• Fed Chair Jerome Powell is expected to signal additional cuts in October and December as inflation remains slightly above target and job growth cools.

Mortgage Rates Tick Lower

• According to Zillow data, the average rate on a 30-year fixed mortgage declined three basis points to 6.13%.
• The average 15-year fixed rate fell five basis points to 5.41%, and the 5/1 adjustable-rate mortgage averaged 6.66%.
• Lenders began reducing rates in anticipation of the Fed’s move, reflecting immediate market adjustments rather than waiting for the formal announcement.

Market Reaction and Outlook

• Treasury yields dropped sharply on expectations of easier monetary policy, driving down borrowing costs across mortgages, auto loans, and credit cards.
• While the quarter-point cut is nearly certain, economists will watch the Fed’s forward guidance for clues on the pace of future easing.
• Homebuyers are advised to lock in rates promptly, as volatility could return if economic data diverges from Fed projections.