For the second time in three months, the Federal Reserve cut the federal funds rate on Thursday. The interest rate is now between 4.50% and 4.75% and is 75 basis points lower than on September 1. And if inflation continues to fall, it could fall even further when the Fed reconvenes for its final meeting in December. from 2024. Although this is not great news for savers who have become accustomed to high interest rates on selected CFLs savings accountsThis is generally welcome news for borrowers who have had to pay more on mortgages, credit cards and more.

Mortgage interestin particular, rose to theirs last year highest level since 2000 but have since fallen along with inflation. But it’s been a bumpy ride back to the bottom in recent weeks. So what does this latest Fed rate cut mean for mortgage rates? That’s what we’ll break down below.

View here what mortgage interest rate you are currently eligible for.

What the Fed’s rate cut means for mortgage rates

In short, as welcome as Thursday’s rate cut is, it is unlikely to add much to mortgage rates. This is why:

It was only a cut of 25 basis points

Come on The larger than expected cut of 50 basis points in September, Mortgage interest rates fell to the lowest level in two years. That gave homebuyers a chance to take action and some homeowners looking to refinance a chance to realize some savings opportunities. But this week’s cut was only 25 basis points. That is certainly a step in the right direction, but not significant enough to result in a huge reduction in mortgage rates. And since lenders consider multiple factors in their mortgage rate offers—not just the federal funds rate—it’s unlikely that mortgage rates will even fall by the same percentage as the federal funds rate just did.

See what mortgage interest rates are available now that the Fed has cut rates again.

It was priced in by lenders

Homebuyers who checked mortgage rates on Monday this week and then checked again after the Fed meeting may have been surprised to see the same or a slightly changed rate offer. This is probably because lenders had already priced in today’s reduction in anticipation. This often happens because lenders are monitoring the market and making necessary adjustments to their rates. This is why you should check the mortgage interest rate daily for a chance to take advantage of a lower than average rate.

Other factors offset these cuts

There was no Federal Reserve meeting in October. And yet mortgage rates rose by more than a point this month. Why is that? That’s because other factors influence mortgage interest rates in addition to what the Fed does (or doesn’t do). And some of these other factors, like the unemployment And inflation interest rate, can and often will offset the Fed’s formal interest rate cuts. The Interest on 10-year government bonds also plays a crucial role in the direction in which mortgage rates move. So while a Fed rate cut will theoretically help lower mortgage rates, it’s often a much more complicated set of factors that push rates higher.

The bottom line

A Fed rate cut is only part of the equation for borrowers looking for low mortgage rates. That said, waiting for the ideal time to buy comes with its own set complications. So in today’s market it may be worth buying now, especially if you want to keep your… dream houseAnd refinancing at a time when interest rates have finally dropped to a level you are comfortable with.

Learn more about your current options for buying a home online.