{"id":19708,"date":"2025-08-21T06:21:54","date_gmt":"2025-08-21T06:21:54","guid":{"rendered":"https:\/\/finderica.com\/?p=19708"},"modified":"2025-08-21T06:21:54","modified_gmt":"2025-08-21T06:21:54","slug":"dont-circle-september-17th-on-your-calendar-as-mortgage-rate-drop-day","status":"publish","type":"post","link":"https:\/\/finderica.com\/?p=19708","title":{"rendered":"Don\u2019t Circle September 17th on Your Calendar as Mortgage Rate Drop Day"},"content":{"rendered":"
\n

I\u2019m seeing more people buy into the idea, or perhaps myth, that mortgage rates will drop when the Fed makes its next interest rate decision.<\/p>\n

That day is rapidly approaching, with the next Fed meeting<\/a> set to take place September 16th, followed by a rate decision the next day.<\/p>\n

Many are now expecting big things to happen, with the chance of a rate cut basically a sure thing at the moment.<\/p>\n

The problem is the Fed doesn\u2019t set mortgage rates, and their own policy rate applies to short-term rates, not 30-year fixed mortgages.<\/p>\n

As such, there will likely be a lot of disappointment in a month, even if they cut as expected.<\/p>\n

Fed Rate Cut Looks Extremely Likely in September<\/h2>\n

\"Sep<\/p>\n

At the moment, the chances of a Fed rate cut in September stands at about 85%, per the latest probabilities from CME<\/a>.<\/p>\n

While it can change from day to day, it seems like a pretty good bet that the federal funds rate will be lowered in about a month.<\/p>\n

The expected cut is 25 basis points (bps), which is the usual amount the Fed will raise or cut unless there are extenuating circumstances.<\/p>\n

That\u2019s up for debate, but the only reason the odds of a cut are so high right now is because of that ugly July jobs report.<\/p>\n

Prior to that, the odds of a Fed rate cut in September were only just above 50%. So it was basically a toss-up.<\/p>\n

In other words, pushing a 50-bp cut sounds like an overreaction, even though Treasury Secretary Scott Bessent recently floated the idea.<\/p>\n

Anyway, if and when the cut happens, banks will also lower the prime rate by the same amount.<\/p>\n

So if the Fed cut rates by 25 bps, prime will come down from 7.50% to 7.00%. That will directly impact HELOC rates, which are tied to prime.<\/p>\n

However, a cut to the fed funds rate will not lower mortgage rates by the same amount, or at all.<\/p>\n

Meaning, if the 30-year fixed happens to be 6.50% on the day, it wouldn\u2019t all of a sudden drop to 6.25%.<\/p>\n

In fact, mortgage rates could go up that day, slip a few bps, or do nothing at all.<\/p>\n

That\u2019s because the Fed rate cuts are generally telegraphed, and don\u2019t come as a big surprise when they\u2019re announced.<\/p>\n

As such, any movement in longer rates related to policy expectations (or underlying data driving those decisions) is already baked in.<\/p>\n

30-Year Fixed Mortgage Rates Already Fell Over the Past Month<\/h2>\n

\"August<\/p>\n

To illustrate, the 30-year fixed already slipped to around 6.50% from 6.75%, or roughly 25 bps, per MND<\/a>.<\/p>\n

It has since inched back toward 6.60%, but the general idea is the expected Fed rate cut is already priced in.<\/p>\n

And that\u2019s if federal funds rate expectations directly correlate with long-term mortgage rates, which they might not.<\/p>\n

Mortgage rates ultimately dropped because of a very poor jobs report, which hinted that all is not well in the economy.<\/p>\n

When the economy shows signs of weakness, the Fed may become more accommodative to boost spending and business activity.<\/p>\n

At the same time, investors may reduce their risk exposure to things like equities and put more of their money into safe haven bonds like government treasuries.<\/p>\n

If and when they do that, bond yields drop as the bond\u2019s price rises. The same is true of mortgage-backed securities, which correlate very well with 10-year bond yields.<\/p>\n

So if economic data continues to come in on the weaker side, bonds should see more support, and yields (interest rates) should continue dropping.<\/p>\n

That\u2019s how you\u2019d get lower mortgage rates. Not from the Fed slashing its own policy rate, which only happens (at least in normal times) due to underlying economic data.<\/p>\n

Follow the data not the Fed, because the Fed follows the data and reacts after the data is known.<\/strong><\/p>\n

Don\u2019t wait to see what they say. Mortgage rates move daily (based on this data) while the Fed only meets eight times a year.<\/p>\n

And if you circled September 17th on your calendar as mortgage rate drop day, understand that it might not pan out the way you think it will.<\/p>\n

Instead, you might want to circle a different day, September 5th, which is the date the August jobs report is released.<\/p>\n

But even then, the 30-year fixed could be higher in a month or completely unchanged. It will likely only move lower if additional economic data is released that shows the economy is weakening further.<\/p>\n

(photo: DAMS Library<\/a>)<\/p>\n

\n
\n
\n
\"Colin<\/div>\n
\n

Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.<\/p>\n<\/div>\n<\/section>\n

\n
\"Colin<\/div>\n
\n
Latest posts by Colin Robertson (see all)<\/span><\/div>\n<\/div>\n<\/section>\n<\/div>\n<\/div>\n