Lower mortgage rates are ‘potential turning point’ for homebuyers

With the next interest rate decision from Federal Reserve monetary policymakers just over a week away, mortgage rates have continued their downward trajectory as many lenders and investors have priced in a cut. But the markets will need to navigate one more inflation report before the Fed’s Sept. 17 meeting.

On Tuesday at HousingWire’s Mortgage Rates Center, rates for 30-year conforming loans stood at 6.64%, 8 basis points lower than a week ago. Rates for 30-year jumbo loans averaged 6.29%, down 7 bps, while rates for 30-year loans through the Federal Housing Administration (FHA) were at 6.35%, down 5 bps.

Samir Dedhia, CEO of One Real Mortgage — The Real Brokerage’s in-house mortgage division — said in commentary last week that the lowest rates in nearly a year are “signaling a potential turning point for buyers and homeowners.”

Dedhia noted that rates continue to follow a pattern that began early last month, sparked by an underwhelming jobs report for July. An even weaker jobs print for August followed, pushing the likelihood of a rate cut next week by the Fed close to 100%.

“Lower mortgage rates are already making a meaningful difference,” Dedhia said. “Buyer activity has picked up compared to this time last year, and refinancing is on the rise, now making up nearly 47% of all mortgage applications, the highest share we’ve seen since last October.

“For homebuyers who’ve been sitting on the sidelines, these drops in rates are expanding affordability and giving them new confidence. And for homeowners, the window to refinance and save is opening wider. With expectations growing for a rate cut at the Fed’s next meeting, this could be just the beginning of a stronger housing market heading into the fall.”

Fed policy is poised to shift

The Fed’s dual mandate to promote maximum employment and stable prices is facing turbulence. Businesses are creating new jobs at a much slower pace. Annualized inflation remains above the Fed’s 2% target and has moved slightly higher in the wake of international tariffs imposed by President Donald Trump.

John Williams, the president of the Federal Reserve Bank of New York and a voting member of the Federal Open Market Committee (FOMC), said in public remarks last week that economic output is also tepid. Gross domestic product growth was running at about 1.5% during the first half of 2025, compared to roughly 2.5% during the same period a year earlier.

“Looking ahead, if progress on our dual mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time,” Williams said.

“This expectation reflects a delicate balancing of risks to our mandate goals. On the one hand, we need to keep the labor market in balance to ensure that the effects of tariffs do not spill over into a longer-lasting broad increase in inflation. On the other hand, maintaining a stance of ‘too restrictive policy for too long’ could increase risks to our maximum employment mandate.”

Raphael Bostic, the president of the Federal Reserve Bank of Atlanta (who is not voting with the FOMC in 2025), said last week that inflation remains above pre-pandemic averages due largely to core services, excluding energy. Prices for goods are also on the rise, due in part to tariffs.

“The puzzle I’m grappling with is whether those inflationary effects of tariffs will quickly pass or prove more persistent,” Bostic said. “Even among FOMC participants, opinions on that question vary. I continue to believe that the effects of tariffs on consumer prices won’t fade fast, and in fact will not fully materialize for some months. My view is based on input from business leaders and extensive research.”

At next week’s meeting, the FOMC will release its newest Summary of Economic Projections, which includes an estimate for the federal funds rate through 2027. In June, the committee had a median projection of 3.6% for 2026, implying cuts of roughly 50 bps by then.

Consumer Price Index (CPI) data for August will be released on Thursday and is expected to provide crucial last-minute guidance for the committee. Torsten Slok, chief economist at Apollo Global Management, told CNBC on Monday that a quarter-point reduction is the expected move, but it’s not set in stone.

“In the worst case, if inflation surprises to the upside, it will really make it tricky, and we could begin to have a discussion about this sense next week,” Slok said. “Namely, how does the Fed do policymaking when one side of the dual mandate says it should be cutting and the other side says it should be hiking?”