Mortgage Rates May Not Budge Much Even With a Fed Rate Cut in October, Experts Say
NEW YORK – Even if the Federal reserve cuts interest rates in October, homeowners shouldn’t necessarily expect a significant drop in mortgage rates, according to several financial experts. While a rate cut is anticipated, its impact might potentially be limited, particularly if it’s a modest 25 basis point decrease.
Experts suggest that factors like Treasury yields and broader economic data – specifically slowing growth or cooling inflation – will likely have a more direct influence on mortgage rates than the Fed’s decision. “The market has largely priced in a pause, and even a cut, so it’s unlikely to move the needle dramatically,” says Robert Breeze, executive vice president at 10X Mortgage.”The market will follow suit no matter what the October Fed decision is.”
Breeze adds that falling bond yields, often in anticipation of Fed moves, can have a quicker impact on mortgage rates. “We’ve seen this happen before,especially when bond yields fall in anticipation,as that has a more direct impact on mortgage rates,” he says.
Who Could Benefit from Refinancing?
Homeowners who secured mortgages with rates between 7% and 8% in the past year or two are prime candidates for refinancing if rates decline, according to industry professionals. Refinancing at a lower rate could reduce monthly payments or free up cash for home improvements or other expenses.
Demand for different mortgage options is already increasing. Breeze notes a surge in cash-out refinances and adjustable-rate loans among borrowers with ample equity. Simultaneously occurring, more borrowers are considering adjustable-rate mortgages (ARMs) due to their initially lower rates.
“For those betting on lower rates in 2026, ARMs might be a great ‘bridge’ tool to capitalize on lower rates today, with the assumption that they will refinance in 12 to 24 months,” says Michael Shayowitz, a mortgage broker with Assurance financial. He cautions borrowers to carefully consider the risks associated with ARMs before proceeding.
The Bottom Line
While a Fed rate cut could offer some relief, experts emphasize the importance of focusing on affordability.Potential homebuyers and those considering refinancing should prioritize securing a loan with a low rate and favorable terms they can comfortably manage, alongside budgeting for property taxes, insurance, and other related costs.
