On September 17th, 2025, the Federal Reserve cut interest rates—a move that had many people instantly thinking mortgage rates would drop too. But if you’ve been watching this closely, you know it doesn’t work that way. In fact, this exact scenario played out before. Back in June and again in September of 2024, everyone expected mortgage rates to tumble when the Fed cut rates. And for a short time, 30-year mortgage rates did dip below 6% ahead of the Fed’s decision. Then the Fed actually made the cut—and mortgage rates shot back up. Fast-forward to September 17th, 2025, and we saw the same thing happen all over again.

Here’s the reality: when the Federal Reserve cuts rates, they’re lowering the Fed funds rate—that’s the rate banks charge each other for overnight lending. When this rate moves, the prime rate (which affects credit cards, home equity lines, and other consumer loans) usually follows. In simple terms, borrowing costs on things like credit cards and some adjustable-rate loans get cheaper. It’s a sign the Fed believes inflation is no longer a big threat and that the economy might be cooling.

But mortgage rates? They don’t automatically drop when the Fed cuts. Mortgage rates are driven more by investor reaction to why the Fed is cutting. If the market thinks the Fed cut signals a weakening economy, rates might move lower—but not in a straight, dollar-for-dollar way. Sometimes, investors worry the Fed is behind the curve or that inflation could flare back up. When that happens, long-term mortgage rates can actually rise—right after a Fed cut.

A better predictor of mortgage rate movement is the monthly jobs report, released the first Friday of every month. Employment data gives investors a real-time look at the economy’s strength and is often more powerful for mortgage rates than a Fed meeting.

Economists are currently forecasting the average 30-year fixed mortgage rate to hover between 6% and 6.25% in 2026. So waiting for some “magical” rate drop before buying or refinancing might not be the smartest strategy. As the saying goes, a bird in the hand is worth two in the bush. If today’s rates work for your budget—and you can refinance later if they move lower—waiting on the sidelines could cost you more in the long run.

Bottom line: Don’t assume a Fed rate cut equals lower mortgage rates. Focus instead on your personal financial goals and what makes sense for your situation today.

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