Mortgage rates ticked slightly upwards following the announcement, but the Fed’s move acted as an important signal to borrowers
Mortgage rates don’t move directly in tandem with Federal Reserve cuts – and average 30-year fixed rates actually inched upwards Wednesday despite the Fed’s decision to lower its own funds rate.
But news of the central bank reducing rates can act as an important sign for homebuyers and owners of downward pressure on borrowing costs, and mortgage rates have slid in recent weeks as market expectations of a Fed cut ramped up.
That presents a “huge opportunity” for the mortgage industry and market, United Wholesale Mortgage (UWM) executive vice president and chief strategy officer Alex Elezaj (pictured top) told Mortgage Professional America in the wake of the Fed’s latest decision.
He said the Fed’s Wednesday move, its first rate cut of 2025, merely strengthened the sense that the mortgage market could be in for a busy end to the year as buyer confidence gradually returns.
“We’re very optimistic about the fourth quarter. Just in the past few weeks as mortgage rates have come down and we did our own incentive… we’ve seen very big volume,” Elezaj said. “We’re excited about it, we’re prepared for it.
“It seems like from our perspective, a lot of the economic indicators are currently working in our favor and we think it could be a really big Q4 for us.”
Wednesday’s jump in bond yields, which sent mortgage rates higher, means borrowers ironically might have gotten a better deal before the Fed’s announcement than immediately after it.
Still, the cut serves as a significant psychological tool for mortgage shoppers eyeing up a purchase or refinance. “It does provide a marketing piece that we think about where the average consumer doesn’t follow this all the time,” Elezaj said.
“And when they see that, they tend to just figure ‘Hey, if the Fed cut rates by 25 basis points, that should mean something really good for me and my mortgage.’”
After months of holding steady even in the face of intense political pressure from the Trump administration, a weakening jobs market was finally the fuel needed to drive the Federal Reserve to cut.https://t.co/ugx4JBsPYB
— Mortgage Professional America Magazine (@MPAMagazineUS) September 17, 2025
Borrower confidence improves amid rate decline
Last week, the contract rate on a 30-year fixed-rate mortgage slipped to 6.39%, according to the Mortgage Bankers Association (MBA). That marked its lowest level for a year and sparked a surge in refinancing, which made up 60% of all applications in the week ended September 12.
Elezaj said activity on the purchase side has also been robust as borrowers grow accustomed to the reality of plus-six rates.
“We’re definitely noticing that purchase volume is still extremely strong,” he said. “We’re seeing a lot of that. I think most people are [saying] ‘Hey, if it’s in a 6% range I’m going to buy the house. I’m going to get what I want knowing that in six months or a year or so, I can refinance.’
“Obviously as rates go down, some home values and sales prices go up. So the reality is, most people are saying ‘I’ll lock in. I’m going to purchase this home and lock in the rate right now and refinance when the time is right.’”
What’s in store for the rest of 2025?
Further Fed cuts look likely in the months ahead, with Morgan Stanley recently indicating it expects each of the central bank’s remaining decisions of 2025 to see rates fall.
Mortgage rates, meanwhile, aren’t exactly set to plummet this year and next, but they’re still likely to move lower – barring unexpected economic shocks – by the end of 2026. Fannie Mae’s latest forecast anticipates an average 30-year fixed rate of 6.1% by December next year.
Elezaj and UWM aren’t mapping out their strategy based on market watchers’ projections, he said, but rather gearing up to make sure they’re ready for when rates continue to fall.
“The way that we look at it is, ‘Hey, let’s be prepared, let’s continue to gain market share, let’s continue to help brokers and dominate what we do,’” he said, “so if they do drop faster than we expect, then we’re prepared, we’re executing on it, and we feel great about it.”
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