Federal Reserve Rate Cut: What it Means for Home Buyers and Sellers

I'm writing to provide a quick summary of the Federal Reserve's announcement yesterday, September 17th, and what it means for the real estate market.

The Federal Reserve announced a 0.25% cut to the federal funds rate, bringing the new target range to 4.00% - 4.25%. This is the first rate cut we've seen this year, and the Fed has indicated that more cuts may be on the horizon in 2025. The primary driver for this decision is a concern over a weakening labor market.

Impact on Mortgage Rates

It's important to understand that the federal funds rate does not directly dictate mortgage rates. Instead, mortgage rates are more closely tied to the 10-year Treasury yield. Because this rate cut was widely anticipated by the market, it's unlikely we'll see a sudden, significant drop in mortgage rates. Much of the impact was already "priced in" to the current rates.

However, a lower federal funds rate creates a more favorable environment for borrowing in the long run. Over time, this move will likely contribute to a general downward trend in mortgage rates, providing some relief for borrowers.

What This Means for Home Buyers and Sellers

This rate cut has a dual impact on the housing market:

• For Home Buyers: Lower mortgage rates mean increased purchasing power. Buyers may find they can qualify for a larger loan and that their potential monthly payments are more affordable. The downside is that lower rates often bring more buyers into the market, increasing competition and potentially driving up home prices.

• For Home Sellers: A larger pool of qualified buyers is great news for sellers. Increased demand can lead to more offers and potentially a higher final sale price. However, sellers who are also looking to purchase a new home will face the same competitive environment as other buyers.

In summary, while this rate cut is a positive signal for the housing market, the effects will be more gradual than immediate. It's a welcome development for buyers who have been struggling with affordability and for sellers looking for a more active market.

Please share this information with people who might be in the market to buy or sell. Let me know if you have any questions.

Best regards,

Todd Holmes 
Broker Associate, Realtor® 
RE/MAX Alliance 
Mobile: (303) 570-3419 
Email: [email protected] 
Website: https://toddholmes.remax.com

Mortgage Rate Weekly Average

The Federal Reserve Bank of St. Louis (FRED) mortgage rate chart tracks the average interest rate for 30-year fixed rate mortgages, serving as a major indicator for both home buyers and sellers. Declining rates typically lead to rising demand and potentially higher home prices.

Source: Freddie Mac, 30-Year Fixed Rate Mortgage Average in the United States [MORTGAGE30US], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/MORTGAGE30US, September 18, 2025