What the September Fed Meeting Could Mean for Mortgage Rates and Real Estate

As the Federal Reserve prepares for its September 16–17 meeting, markets are bracing for what could be the first rate cut since 2020. With mortgage borrowers, homebuyers, and real estate professionals watching closely, the Fed’s decision will carry significant implications for the housing market.

The Fed’s Position Going Into September

At its last meeting in July, the Fed kept its benchmark federal funds rate steady at 4.25%–4.50%. While inflation remains a concern, recent signs of a cooling labor market have shifted the conversation. Fed Chair Jerome Powell signaled at Jackson Hole that risks to employment could outweigh inflation pressures, prompting Wall Street to revise its forecasts.

Major institutions, including Morgan Stanley, Goldman Sachs, and J.P. Morgan, now expect a quarter-point rate cut in September. The CME FedWatch tool suggests over a 90% probability of easing.

How Fed Cuts Influence Mortgage Rates

It’s important to note that the Fed does not directly set mortgage rates. Instead, mortgage rates track movements in the bond market, particularly the 10-year Treasury yield. When investors anticipate Fed cuts, Treasury yields often fall, which can bring mortgage rates down as well.

Currently, the average 30-year fixed mortgage rate stands near 6.6%. A single Fed cut may not move the needle dramatically, but it could mark the beginning of a trend. If the Fed signals more easing ahead, mortgage rates could gradually decline toward 6% by late 2025.

Scenarios for the Housing Market

1. Fed Cuts in September – A modest decline in mortgage rates could draw some buyers off the sidelines, improving affordability slightly. Homebuilders may see renewed activity, and housing stocks have already responded positively to the prospect of lower borrowing costs.

2. Fed Holds Steady – If the Fed waits, mortgage rates are likely to remain elevated. Affordability challenges would persist, keeping demand subdued.

3. Fed Cuts Aggressively Later – Should economic conditions weaken further, sharper cuts could bring mortgage rates lower, possibly under the 6% threshold, reigniting demand. However, increased competition for limited housing supply could push home prices higher, offsetting affordability gains.

What Buyers and Sellers Should Watch

For buyers, the key is not just waiting for rates to drop, but considering the overall market dynamic. Even if mortgage rates ease slightly, rising demand may put upward pressure on prices. Sellers, meanwhile, may find renewed interest from buyers if rates begin to trend lower.

The Bottom Line

The Fed’s September meeting could mark the start of a rate-cut cycle, but the impact on housing will depend on how quickly mortgage rates respond and whether supply constraints persist. A gradual decline in borrowing costs could provide relief, but a surge in demand could keep affordability tight.

All eyes now turn to September 16–17, when the Fed’s decision and its updated economic projections will shape the outlook for real estate through the end of 2025.