Impact of September Fed Rate Cut on Mortgage Rates: An Expert's Perspective

A 25 basis point rate cut in September is expected to lower the 30-year fixed mortgage rate from above 6.7% to around 6.25%. A 50 basis point cut is also possible, according to Mohammed El-Erian, which could further reduce mortgage rates. The mortgage market tends to move with the bond market, and the jobs report has already led to a 0.375 percentage point decrease in mortgage rates.

Mortgage rates have been a subject of interest and concern for both homebuyers and financial professionals alike. As of the end of July 2025, the average 30-year fixed mortgage rate stood at 6.72%, according to Freddie Mac data [1]. However, there is a potential for significant changes in the coming months, with experts predicting a rate cut in September.

A 25 basis point rate cut in September is expected to lower the 30-year fixed mortgage rate from above 6.7% to around 6.25%. Furthermore, a 50 basis point cut is also possible, according to Mohammed El-Erian, which could further reduce mortgage rates [2]. The mortgage market tends to move with the bond market, and the jobs report has already led to a 0.375 percentage point decrease in mortgage rates.

The Federal Reserve (Fed) has maintained a cautious stance regarding interest rate cuts. After holding rates between 5.25% and 5.5% between July 2023 and August 2024, the Fed implemented three rate cuts between September and December 2024, totaling one percentage point. The committee has held rates steady since then, as it waits for clearer signs of how tariffs are impacting inflation [1].

The next two-day FOMC meeting is set for September 16 and 17. In addition to its interest decision, the committee will release its quarterly Summary of Economic Projections, which will provide an updated outlook on key economic indicators, including GDP growth, inflation, and unemployment, as well as interest rate projections for the near and longer term [1].

While the Fed has maintained a cautious approach, the two rare dissenting votes at the July meeting sent a potential signal that a rate cut could be on the table if more members align with this view. Following the July meeting, odds of a September rate pause were roughly 3-to-2, with about 60% of Fed watchers expecting the central bank to keep rates the same and around 40% anticipating a quarter-point cut, according to the CME FedWatch tool [1].

Expert predictions for mortgage rates in 2025 and 2026 vary. The National Association of Home Builders (NAHB) expects the 30-year mortgage rate to average around 6.62% by the end of 2025 and just above 6% by the end of 2026 [1]. The National Association of Realtors (NAR) predicts mortgage rates to average 6.7% in the second half of 2025 and 6% in 2026 [1]. Zillow Home Loans forecasts mortgage rates to remain near the mid-6% range through the end of 2025 [1]. Fannie Mae and Freddie Mac also predict mortgage rates to end 2025 and 2026 at 6.4% and 6%, respectively [1].

In conclusion, the mortgage market is poised for potential changes in September, with a 25 basis point rate cut expected to lower the 30-year fixed mortgage rate to around 6.25%. A 50 basis point cut is also possible, depending on the Fed's decision. The mortgage market's future will depend on the Fed's rate decisions, economic data, and inflation trends.

References:
[1] https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/
[2] https://www.forbes.com/advisor/mortgages/mortgage-interest-rates-forecast/