This Market Update is written by our Capital Market specialists each week to bring you insight into what's happening in the market and how it may affect mortgage rates and real estate trends.
Market Commentary:
“The 30-year fixed-rate mortgage fell 15 basis points from last week, the largest weekly drop in the past year,” said Sam Khater, Freddie Mac’s Chief Economist. “Mortgage rates are headed in the right direction and homebuyers have noticed, as purchase applications reached the highest year-over-year growth rate in more than four years.”
On September 17, the Federal Reserve implemented a widely anticipated 0.25% rate cut, lowering the federal funds target range to 4.00%–4.25%, the first reduction since December 2024. The decision reflects growing concerns over a softening labor market, with recent jobs data showing slower gains and a slight uptick in unemployment. Inflation remains elevated, but the Fed signaled that employment conditions now warrant more immediate attention.
Fed officials indicated the possibility of two additional rate cuts before year-end, contingent on further economic data. New Fed Governor Stephen Miran dissented, advocating for a more aggressive 0.50% cut. Yields on U.S. Treasuries declined ahead of the announcement, with the10-year yield falling to 4.036%, reflecting expectations of easing monetary policy. The S&P 500 and Nasdaq closed slightly lower following the Fed’s announcement, while the Dow Jones Industrial Average posted modest gains. Markets had largely priced in the rate cut, resulting in muted volatility. The Fed’s pivot toward easing signals a shift in policy priorities amid persistent inflation and political pressure. While the rate cut offers short-term relief to borrowers, broader economic indicators including inflation, consumer spending, and labor market health will shape the trajectory of future monetary policy.
Fed Watch: Target rate (in bps) possibilities, according to the CMEGroup (as of 09/18/2025 – 12:00 PM EST):
Wages Are Growing Faster Than Rents and Mortgage Payments:
2025-2030 Five-Year Housing Market Predictions:
Unsurprisingly, the Fed reduced rates 25bps. What’s surprising; one FOMC member, its newest, sees more than 50bps in cuts this year, nine expect two 25bps cuts, two see one cut, and seven see none. The median is two cuts, but the dispersion is gigantic. It’s because equity markets are setting records, inflation is rising, and OBBBA tax cuts will be stimulative. However, the labor market weakens. A mildly/slightly hawkish cut. - Elliot F. Eisenberg the Bowtie Economist
News You Can Use:
· Fed approves quarter-point interest rate cut and sees two more coming this year
· Mortgage refinance demand spikes nearly 60%, as interest rates drop sharply
· Builder Confidence Steady but Future Sales Expectations Hit Six-Month High – Eye On Housing
· Could the Federal Reserve interest rate cut boost the US housing market? - BBC News
· Wages Are Growing Faster Than Rents and Mortgage Payments
· US Housing Market 10-Year Outlook for Investors | Morgan Stanley
*Communication is intended for Industry Professionals only and not intended for Consumer Distribution
Interest rate and annual percentage rate (APR) are based on current market conditions as of 09/18/2025, are for informational purposes only, are subject to change without notice and may be subject to pricing add-ons related to property type, loan amount, loan-to-value, credit score and other variables. Estimated closing costs used in the APR calculation are assumed to be paid by the borrower at closing. If the closing costs are financed, the loan, APR and payment amounts will be higher. Contact us for details. Additional loan programs may be available. Accuracy is not guaranteed, and all products may not be available in all borrower's geographical areas and are based on their individual situation. This is not a credit decision or a commitment to lend. Actual interest rate, APR, and payment may vary based on the specific terms of the loan selected, verification of information, your credit history, the location and type of property, and other factors as determined by Prosperity Home Mortgage, LLC. Not available in all states. Rate is as of 09/18/2025 and is subject to change at any time without notice. Opinions, estimates, forecasts, and other views contained in this document are those of Freddie Mac’s economists and other researchers, do not necessarily represent the views of Freddie Mac or its management, and should not be construed as indicating Freddie Mac’s business prospects or expected results. Although the authors attempt to provide reliable, useful information, they do not guarantee that the information or other content in this document is accurate, current, or suitable for any particular purpose. All content is subject to change without notice. All content is provided on an “as is” basis, with no warranties of any kind whatsoever. Information from this document may be used with proper attribution.
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