📉 Mortgage Rates Drop as Markets Bet on Fed Rate Cut

📉 Mortgage Rates Drop as Markets Bet on Fed Rate Cut

Good news for homebuyers: mortgage rates are falling again — and this time, there’s a strong hint from the Federal Reserve that even lower rates could be on the horizon.

🏡 Mortgage Rates Just Hit a 5-Month Low

The average 30-year fixed mortgage rate dropped to 6.59% this week, down nine basis points from the previous week, according to data from www.zillow.com shared with NerdWallet. (A basis point is one one-hundredth of a percent.)

That might not seem like a huge change, but it’s the lowest we’ve seen in nearly five months — a welcome break for buyers and refinancers who’ve been watching rates hover at stubbornly high levels all summer.

🗣️ Powell Hints at a Rate Cut

So what’s behind this shift? The biggest driver was a speech by Federal Reserve Chair Jerome Powell at the annual Jackson Hole economic symposium on August 22.

While Powell didn’t explicitly promise anything, he did suggest that the Fed may need to adjust its policy as risks to the job market increase. In particular, July’s jobs report showed a noticeable slowdown in job growth — a red flag for the economy, even though unemployment remained steady.

His key line?

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”

Translation: If the labor market continues to cool, the Fed may cut interest rates to give the economy a boost.

📊 Markets Are Betting on a September Cut

Wall Street definitely took the hint. The CME FedWatch Tool, which gauges investor expectations, showed a jump in confidence: the likelihood of a September rate cut climbed from 75% before Powell’s speech to 87% today.

That cut — likely just a quarter of a percent — may not sound like much, but it could be enough to shift momentum in lending and housing markets.

That said, nothing is guaranteed. The Fed is famously data-driven, and we’ve got a few major reports coming in before the next policy meeting on September 16–17, including:

August jobs report (Sept. 5)

Consumer Price Index (CPI) (Sept. 11)

Personal Consumption Expenditures (PCE) — the Fed’s favorite inflation gauge

These numbers will heavily influence the final decision.

🏠 What It Means for You and Your Mortgage

Here’s the twist: mortgage rates often move before the Fed does. They’re based on long-term expectations — not just what the Fed does today, but what it might do in the future.

Since Powell’s Jackson Hole speech, the average 30-year mortgage rate has already dropped 28 basis points — more than the Fed’s expected cut.

So if you’ve been waiting for mortgage rates to fall, they kind of already have.

Still, keep an eye on the Fed’s next meeting. Along with the rate decision, they’ll release their Summary of Economic Projections, offering insight into what policymakers expect for the rest of 2025 and beyond.

If the Fed hints at more cuts later this year, we could see mortgage rates drop even further.

💡 Bottom Line

If you’re thinking about buying a home or refinancing, now’s a smart time to start running the numbers. Rates are moving — and the Fed could give them another push in the weeks ahead.

JOE O’TOOLE
www.joeotoole.com
954-805-5613
joe@jotoole.com