Fed Cuts Rates 25 Basis Points; Mortgage Rates Fall to 2025 Low

On Sept. 17, the Federal Reserve voted to cut the federal funds rate by 25 basis points. A basis point is one one-hundredth of a percentage point.

Mortgage lenders anticipated this move; last week, the average 30-year mortgage rate fell below 6.5% for the first time in 2025. “Rates have been trending downward lately, and while we’re not seeing dramatic drops, the momentum is encouraging,” said Chris Lim, chief growth officer at Re/Max Holdings, a global real estate brokerage network.

According to the latest Consumer Price Index released on Sept. 11, inflation rose 2.9% year-over-year in August, the highest measure since January. While rising inflation would typically encourage the Federal Reserve to raise rates, a weakening job market has pulled central bankers in the other direction.

The unemployment rate has been climbing since June, reaching its highest level since 2021. The August jobs report, released on Sept. 5, raised concern among economists — the U.S. added just 22,000 jobs, less than a third of the projected 75,000. Sectors sensitive to economic policy changes, like federal government jobs and wholesale trade, saw especially sharp declines.

The Fed aims to strike a balance between inflation and unemployment. The trouble is that these are usually inversely related: high unemployment most often means low inflation. With both factors on the rise, central bankers’ path becomes more complicated.

According to Lim, mortgage rates could continue to ease through late fall and winter. “Inflation data and broader economic signals will continue to play a big role, so I wouldn’t expect rates to plummet — but a slow, steady decline could be on the table, which is good for buyers.”