After waiting for years for some relief, homebuyers and homeowners looking to refinance finally got some welcome news this week when the Federal Reserve announced its first rate cut since 2020. With the federal funds rate frozen for more than a year at a range between 5.25% and 5.50% — the highest in decades — the Fed issued a cut of 50 basis points, which was bigger than many had anticipated. And the market reacted strongly, hitting all-time highs on Thursday.
And that news came after mortgage rates plunged on Wednesday to 6.15%, the lowest point they’ve been at in two years, or since September 2022. But as this week’s rate cut reverberates across the market and as lenders start processing this new reality (additional Fed cuts look possible for November and December), homebuyers may have a new series of questions. At the top of the list: Will mortgage interest rates fall further in September? That’s what we’ll break down below.
Start by seeing how low of a mortgage interest rate you could lock in here.
Will mortgage interest rates fall further in September?
In short, it’s unlikely that mortgage interest rates will fall much further in September, even if that doesn’t mean that you should stop monitoring the market to take advantage of minor drops.
Still, most of the factors that can influence what lenders offer borrowers on mortgage loans, like the unemployment rate, the inflation rate and Federal Reserve actions, have already taken place so far this month. And many lenders likely already accounted for these actions prior to the formal Fed action, pricing in presumed rate cuts to their offers before it was official on September 18. This is why the rate you saw listed on a lender website on Tuesday, for example, is the same one you’re likely seeing today (or close to it).
But that doesn’t mean mortgage interest rates have bottomed out or are even close to the bottom right now. With additional unemployment and inflation data set to be released in October, lenders could again lower their offers at that point, even absent a formal Fed meeting in the month. And, as has been proven in recent years, any major market volatility could shake up the mortgage market, too. Just don’t expect rates to continue to decline in the final full week of September. Instead, use this time wisely ahead of what could be a rapidly changing market.
Learn more about current mortgage rate options here.
What to do while waiting for mortgage rates to fall
So what should prospective buyers do now as they wait for mortgage rates to fall further? The same things they should have done before the Fed issued a rate cut. Specifically:
- Boost your credit score to improve your chances of getting the best rates and terms.
- Contact a real estate agent to start the homebuying process.
- Get pre-approved so that you’re ready to make a formal offer when you find a home.
- Shop for lenders to see which is offering the best rates and terms.
And don’t forget that rates are temporary but your dream home may only be listed right now. So weigh the costs of a slightly higher rate against the risk of losing a home that may never be relisted when rates are lower.
The bottom line
While mortgage interest rates are unlikely to fall much further in September, it doesn’t mean that they’re done dropping for the rest of 2024, either. It will just take time for them to fall again. Buyers should then consider using this time to position themselves as the most attractive candidate possible. That way, when rates do drop, they’ll be ready to buy a home at the new, lower rate.