What the Fed’s Rate Cut Really Means for Mortgage Rates

Jermaine Antonio Gill
Sep 18, 2025
2 min read

If you’ve been watching the headlines this week, you’ve probably seen that the Federal Reserve cut rates by 0.25%. Naturally, the next question I hear from clients is: “So mortgage rates are dropping, right?”

The truth? Not always. Let me explain why.

Fed Rate vs. Mortgage Rates: What’s the Difference?

The Fed sets the federal funds rate, which is the short-term rate banks use to borrow from one another. Mortgage rates, on the other hand, are tied more closely to bonds and investor demand.

Sometimes a Fed cut nudges mortgage rates down. But other times, like this week, mortgage rates can tick up instead.

What Just Happened

Here’s a quick recap of the Fed’s September meeting:

✅ The Fed cut rates by 0.25% and it was widely expected.
✅ Their dot plot projections show two more cuts this year (late October and early December).
✅ Mortgage rates, according to Mortgage News Daily, are sitting around 6.13%, which is one of the lowest levels in nearly three years.
❌ After the announcement, mortgage rates actually inched up. Why? Because Fed Chair Jerome Powell emphasized the move as “stable” rather than “worried.” Markets read that as cautious instead of “let’s flood the economy with cheaper money.”

Why Mortgage Rates Move Differently

Mortgage rates react more to investor expectations and economic data than to the Fed’s moves alone. Things like:

Inflation reports
Jobless claims
Global economic conditions
Investor appetite for mortgage-backed securities

That’s why you’ll see mortgage rates go up and down, sometimes daily, even when the Fed is cutting.

What Buyers and Sellers Should Know

If you’re trying to time the market perfectly, you’ll drive yourself crazy. Rates will rise, dip, then rise again. Instead of guessing:

Buyers: focus on finding the right home and payment you’re comfortable with. If rates drop later, refinancing is an option.
Sellers: remember that serious buyers are still out there, especially with rates near multi-year lows compared to recent highs.

Bottom Line

The Fed cut rates this week, but mortgage rates don’t follow in lockstep. Right now they’re still hovering near their lowest point in almost three years, which is a positive sign for both buyers and sellers.

If you’re wondering what today’s market means for your situation, let’s talk it through. Every move in rates is another chance to strategize the right way forward. And if you’d like, I can set you up with one of my preferred lenders whose job is literally to watch the market and help clients make the most informed decisions.