Will Mortgage Rates Fall After the October Fed Meeting?

Will mortgage rates rise after the Fed meets?

The Federal Reserve will hold its next Open Market Committee meeting on October 28-29. Will it come with a rate cut? Or will the committee keep rates steady (or possibly even raise them)?

The annualized inflation rate remains above the Fed’s long-term goal of 2%, most recently growing to 3% in September from 2.9% in August and 2.7% in July.

The central bank held rates steady at its first five meetings of 2025 before making a cut in September. How will the latest economic data and indicators weigh on the October Fed cut decision?

Will the Fed cut rates in October?

The FOMC is coming off its first cut of the federal funds rate in 2025 following five consecutive holds.

The central bank waited for the economy to show sustainable softness before loosening its monetary policy in 2024. Many experts anticipated more cuts and gradually descending interest rates in 2025. However, the Trump administration’s power consolidation, tariff turmoil, and upward wealth funneling creates uncertainty and pushed additional cuts further down the line.

As the Fed’s job includes stabilizing the U.S. financial system and setting monetary policy, it’s responsible for maintaining a long-term inflation rate of 2%. Keeping inflation near that level keeps prices steady for consumers.

The annualized inflation rate began surging in 2021 and spiked to a 41-year high of 9.1% in June 2022, according to the U.S. Bureau of Labor Statistics. That year, the Federal Open Market Committee (FOMC) hiked the federal funds rate to tame inflation.

The Fed adjusted its monetary tightening policy multiple times since then. Most recently, the central bank cut the fed funds rate by 25 basis points in September, after holding it in June and July.

The latest inflation reading grew to 3% in September from 2.9% in August and 2.7% in July, according to the Bureau of Labor Statistics*. Despite rising inflation, the worsening jobs market drives growing momentum for another quarter-point cut at the October FOMC meeting.

*In August, President Trump fired the Bureau of Labor Statistics commissioner following a weak employment report.

Interest rate descension could continue

Interest rates rollercoastered throughout 2023 and 2024, with the average 30-year fixed mortgage ranging from 6.08% to 7.79%, according to Freddie Mac. Most recently, the average 30-year fixed rate mortgage reached 6.19% on Oct. 23 — a 13-month low.

Although the annualized pace of inflation fell from the last two years, it’s still above the Fed’s goal. Because of this, tightening monetary policies could always return until inflation gets brought down to a normalized level. Interest rates are notoriously difficult to predict but typically rise in response to Fed tightening.

Some lenders will allow you to lock in a rate for 90 days at little or no cost so you’re protected from higher rates if you don’t close quickly. A few examples of lenders offering this include AmeriSave Mortgage, Quicken Loans, and Rocket Mortgage.

Some lenders are even offering borrowers refinances without repeat lending fees or appraisal fees when rates eventually hit a down cycle. When mortgage shopping, be sure to ask your loan officer about these and potentially other services.

Mortgage rates and the Fed’s role

The Federal Reserve doesn’t determine mortgage rates. Instead, rates are intrinsically tied to Treasury yields, which typically follow the Fed’s actions. The September FOMC projection materials show more rate cuts could be in store over the next year, with the caveat that they will make policy adjustments as necessary.

The fed funds rate is the amount banks pay to borrow money from each other overnight and an increase signals higher inflation and economic expansion. Mortgage interest rates typically rise in response to growth in the fed funds rate.

How mortgage rates respond in the immediate aftermath of these FOMC meetings has been a mixed bag over the last year. Following the three most recent rate decisions, they fell four basis points (0.04%) after June’s hold and two points (0.02%) after July’s, then dropped nine (0.09%) after September’s cut.

Advice for borrowers

So, should you lock in a rate or wait?

Mortgage rates came down over the past few weeks, likely due in part to October’s widely anticipated Fed cut. While we don’t have the rock-bottom rates from Covid’s height years, they’re still below average historically and hover near annual lows. Plus, borrowers refinance during rate downcycles. Many people build wealth and a financial cushion through home equity.

“Mortgage rates tend to fluctuate, I always advise buyers to focus on their specific budget and needs rather than trying to predict economic factors,” said Nick Boniakowski, head of agent partnerships at Opendoor.

If you’re ready to become a homeowner, speak with a local mortgage lender to see what loans and interest rates you can qualify for ahead of October’s Fed meeting.