Could Today's Fed Meeting Drive Mortgage Rates Down More?

CNET staff -- not advertisers, partners or business interests -- determine how we review the products and services we cover. If you buy through our links, we may get paid.

Our mission is to help you make informed financial decisions, and we hold ourselves to strict . This post may contain links to products from our partners, which may earn us a commission. Here’s a more detailed explanation of .

Recent inflation data may have finally given the Federal Reserve the confidence it needs to cut interest rates in September. That was my takeaway from Fed Chair Jerome Powell’s remarks after the central bank announced its decision to leave interest rates unchanged this week. But, as Powell himself underlined: “Certainty is not a word we have in our business.” 

Keeping the Fed’s target interest rate high means overall borrowing costs, including for mortgages, will continue to be expensive. Since the central bank began hiking rates to tame inflation back in early 2022, the cost of purchasing a home has risen significantly. 

So I understand why prospective homebuyers are eager to see some mortgage rate relief. In his remarks, Powell noted the “significant hardship” of high inflation. However, what shocked me was that he made no specific mention of the housing market or how steep mortgage rates and high prices have made homeownership unaffordable.

Why ‘Fed speak’ matters for mortgage rates

When the Fed speaks, financial markets listen. And mortgage rates, which are influenced by investor expectations and bond yields, move too. 

Experts tell me there’s a growing case for the Fed to lower rates in September. Inflation is improving and the labor market is weakening. In fact, the expectation for a rate cut has already been priced into the mortgage market, which explains why we saw mortgage rates dip following weak labor and inflation readings in June. 

From my observation, it seemed to be the first time the Fed has given a more hopeful timeline for its first rate cut since 2020.

“The time is approaching. And if we get data we hope we get, a reduction in the policy rate could be on the table in the September meeting,” said Powell.

To be clear, one single rate cut won’t be a magic cure for the housing market. Mortgage rates won’t plummet immediately, housing supply won’t instantly recover and home prices won’t suddenly become affordable. But a multiyear process of easing interest rates across the board could help move the housing market out of its current paralysis.

There’s always a caveat though. “The markets move on expectation, not always fact,” said Nicole Rueth, SVP of the Rueth Team Powered by Movement Mortgage. Since today’s mortgage rates already reflect the anticipation of a September rate cut, financial markets will be upset if it doesn’t actually happen. 

Powell drove home the message that any future policy changes will depend on “incoming data, the evolving outlook and the balance of risks.” If economic data comes in worse than expected (i.e., inflation stagnates), it could shift market expectations for a September rate cut and put mortgage rates back on the incline. 

I can’t say I haven’t heard that before.

Despite high rates, there are still opportunities for homebuyers

At some point, prospective buyers will get tired of being sidelined and sellers won’t be as determined to hold on to their homes. That pent-up demand and tight inventory in the housing market is likely to rupture.

On paper, today’s housing market is definitely unaffordable. But many experts have told me recently that it’s not a bad time to purchase a home, per se.

“Today’s market is giving buyers the biggest opportunity for more inventory choices and negotiation power,” said Rueth. As rates decline, homebuying demand will increase significantly and buyers will lose that advantage, she said. 

Another benefit of buying today is that you can always refinance your mortgage later when rates come down, said Greg Sher, managing director at NFM lending. Home prices tend to appreciate every year. So, if you delay purchasing until mortgage rates improve, you’ll likely be met with higher home prices that eat away at your savings, Sher said.

If it makes sense for your budget, it’s worth exploring what’s on the market now.

Katherine Watt is a CNET Money writer focusing on mortgages, home equity and banking. She previously wrote about personal finance for NextAdvisor. Based in New York, Katherine graduated summa cum laude from Colgate University with a bachelor's degree in English literature.