Federal Reserve Cuts Interest Rates, Mortgage Rates Hit Lowest in a Year
The Federal Reserve has cut interest rates by a quarter-point, with mortgage rates dropping to 6.35%, providing some relief for homebuyers amid economic uncertainty.
How the Fed's rate cut impacts mortgage rates
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Overview
- The Federal Reserve cut interest rates by a quarter-point, marking the first reduction in nearly a year, with plans for two more cuts this year.
- The average 30-year mortgage rate fell to 6.35%, its lowest level in almost a year, following the Fed's decision.
- Mortgage rates have been declining since late July due to expectations of a Fed rate cut, but further decreases are uncertain.
- Despite lower mortgage rates increasing purchasing power, many Americans still find home prices unaffordable.
- President Trump is urging the Fed for further rate cuts, but the Fed is expected to approach future decisions cautiously.
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Analysis
Center-leaning sources cover the Federal Reserve's interest rate cut neutrally by presenting the Fed's rationale and economic context without editorializing. They include diverse expert opinions on the varied impacts for consumers and highlight the internal divisions among Fed officials regarding future rate paths, providing a balanced and factual account of the complex economic situation.
"The Fed's updated statement no longer refers to the labor market as 'solid,' instead noting that job gains have slowed."
USA TODAY"Predicting when mortgage rates will decline and by how much is daunting because so many variables can influence their trajectory from one week to the next."
ABC News"While lower rates will bring some buyers and sellers into the market, today’s cut will not be enough to break up the housing market logjam."
Associated Press"The move comes as the Fed contends with a two-fold economic challenge: curbing inflation, which has flared in recent months, while supporting job growth, which has slumped."
CBS News"The Federal Reserve cut its benchmark interest rate a quarter of a percentage point on Wednesday, opting for its first interest rate cut this year in an effort to revive the flagging labor market."
ABC News"A Fed interest rate cut, even if delayed and even if in a 25 basis point increment, is good news for homebuyers and homeowners as it can lead to significant cost savings."
CBS News"The Dow Jones Industrial Average jumped 465 points on the news."
Deadline"The Fed is facing both a challenging economic environment and threats to its traditional independence from day-to-day politics."
Chicago Sun-Times"Officials penciled in two more cuts, while the sole dissent from a new Trump appointee â who wanted a more aggressive cut â reflected the fraying consensus that Chair Jerome Powell worked hard to keep together."
Semafor"Mortgage refinancing demand is experiencing a sharp upswing because interest rates have recently dropped to levels not seen in the last few years."
CBS News"A declining interest rate environment will provide some relief for borrowers over time."
ABC News"The challenge now is that inflation is higher than the Fed’s 2% target but the job market is weak, putting the Fed in a difficult position."
Associated PressArticles (33)
FAQ
The Federal Reserve's quarter-point cut is the first rate reduction in nearly a year, signaling its response to slowing job market conditions and economic uncertainty while aiming to balance inflation and employment goals.
Following the Fed’s rate cut, the average 30-year mortgage rate fell to 6.35%, its lowest level in almost a year, providing some relief for homebuyers by lowering borrowing costs.
Yes, the Federal Reserve’s dot plot indicates median expectations among Fed members for two more quarter-point rate cuts at the remaining meetings of 2025, potentially lowering the federal funds rate to around 3.5%–3.75%.
Despite lower mortgage rates increasing buyers' purchasing power, many Americans still face unaffordable home prices due to continuing high real estate prices and economic factors beyond interest rates.
The Fed will balance monitoring inflation—which remains somewhat elevated—and the labor market, particularly any worsening in employment indicators. This balancing act means that future rate decisions depend on economic data trends in jobs and inflation.
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