The mortgage market is adjusting after the Federal Reserve lowered short-term interest rates this week.
Daily measures of the 30-year, fixed-rate mortgage clocked two consecutive days of declines after the central bank's meeting on Wednesday. As of Thursday afternoon, Mortgage News Daily had the loan at 6.26%.
The 15-year, fixed-rate mortgage also decreased on Thursday, falling to 5.76%.
On a weekly basis, mortgage rate averages inched up slightly as of Thursday, according to data from mortgage giant Freddie Mac. However, it's important to note that because that figure is an amalgamation of a week's worth of data, it doesn't include the full effects of Wednesday's Fed meeting.
That said, the weekly average 30-year, fixed-rate mortgage was 6.22%. That's slightly higher than last week's average, but it's below the 6.60% average a year ago.
Similarly, the 15-year, fixed-rate mortgage average rose to 5.54%, higher than a week earlier but lower than the same time a year ago, when it was 5.84%.
Freddie Mac's chief economist, Sam Khater, noted in a statement on Thursday that borrowing costs were still much lower than they were at the start of this year, "providing some sense of balance to the housing market."
Federal Reserve cuts short-term rates
The Fed lowered interest rates for the third time in 2025 — a move economists and markets had anticipated.
What does that mean for borrowers in the mortgage market?
Well, for one, the central bank doesn't set mortgage rates. Instead, it manages short-term rates that determine, for example, the overnight borrowing costs for banks. However, when the Fed changes that figure or even signals to markets that there could be a policy shift coming, it has an effect that ripples through the economy. More often than not, those ripples reach the mortgage market.
In the case of Wednesday's news, "since this rate cut was no surprise, the markets have taken it in stride," Melissa Cohn, regional vice president at William Raveis Mortgage, said in a statement.
Put another way, because investors and banks were expecting the Fed to lower interest rates, the mortgage market had already baked in some of the effects of that decision, so there was no immediate, dramatic change.
Indeed, on Wednesday afternoon, after Fed Chairman Jerome Powell spoke at a press conference about where the bank thinks the economy is headed, daily measures of the 30-year, fixed-rate mortgage showed a decline. It will take more time for the positive change to be reflected in Freddie Mac's data, as it's a weekly average.
Looking ahead, Powell suggested that the Fed is considering one rate cut in 2026 and another in 2027. Whether that forecast comes to fruition, though, is dependent on incoming data about the economy.
And that data is more important when it comes to the future of the mortgage market, according to Brad Case, chief residential economist at Homes.com,
"Risks to the overall economy are roughly balanced between higher inflation and lower employment — meaning a greater likelihood of recession," Case told Homes.com. "If the employment data look soft while the inflation data look not so bad, that would hint that lower mortgage rates would be on the way. In contrast, if inflation worsens while the job market looks not so bad, higher mortgage rates would be more likely."