Waiting for the Feds to Cut Rates

When it comes to mortgage rates, it sometimes feels like we’re all looking into a crystal ball—trying to guess where things are headed next. This past week gave us a perfect example. Inflation reports moved the market in both directions, and mortgage rates ended up hitting their lowest point in 10 months before bouncing slightly higher again.

According to Housing Brief, the Consumer Price Index (CPI) on Tuesday, August 12th, came in as expected, showing that inflation is not heating up as quickly as some feared. That news sent mortgage rates lower and boosted expectations that the Federal Reserve will cut rates in September. In fact, as of midweek, markets were pricing in nearly a 100% chance of a Fed cut.

But then came the Producer Price Index (PPI) on Thursday, August 14th, which measures wholesale inflation. That report was hotter than expected, showing price pressures that could stick around. Bond yields jumped, and mortgage rates followed them up a bit. By the end of the week, we were still near 10-month lows, but the movement showed just how fragile these shifts can be.

So, what does this mean if you’re looking to buy or refinance a home?

The Big Myth: The Fed Directly Controls Mortgage Rates

A lot of people believe that once the Fed cuts rates, mortgage rates will automatically fall. That’s not really how it works. The Fed controls the federal funds rate, which is an overnight rate banks use to lend to each other. Mortgage rates, on the other hand, are influenced by the bond market and investor expectations about inflation and the economy.

Here’s the key point: mortgage rates usually move ahead of time based on what the market expects the Fed to do—not after the Fed makes its official decision.

In fact, the Housing Brief article points out that we’ve seen this before. Back in late 2024, mortgage rates dropped to long-term lows before the Fed cut rates. When the Fed finally acted, rates actually started climbing again.

That’s why waiting around for the Fed’s next move may not give you the results you expect.

Why Acting Now Can Make Sense

Right now, mortgage rates are still near their lowest levels in nearly a year. That’s an opportunity worth paying attention to.

If you’re a homebuyer, locking in a rate today could mean saving thousands over the life of your loan compared to waiting and hoping rates go lower. If you’re a homeowner with a higher rate, refinancing now could reduce your monthly payment and give you breathing room in your budget.

And here’s the best part: if the Fed does cut rates and mortgage rates end up going even lower, you don’t lose out. You can always refinance again in the future. Think of it as a “win-win” approach. You lock in savings now and still have the option to take advantage of any future drops.

There’s No Crystal Ball

Markets are unpredictable. One week of inflation data can send rates lower, and the next week’s numbers can push them right back up. The upcoming jobs report and the Fed’s preferred inflation gauge (PCE) could shift things again.

That’s why trying to perfectly time the bottom of the market is almost impossible. What we do know is that today’s rates are attractive compared to much of the past year, and the market has already priced in the Fed’s expected moves.

Waiting for the “perfect” moment often means missing out altogether.

The Bottom Line

Mortgage rates have already adjusted based on the expectation that the Fed will cut rates. That means the advantage is here now—not necessarily after the Fed makes its official announcement.

If rates do go lower in the future, refinancing remains an option. But if they don’t, locking in today could protect you from paying more down the road.

When it comes to your home and your finances, it’s better to take action with the opportunities we know about today instead of hoping for something that may not happen tomorrow.

Source: Housing Brief, “Mortgage Rates Hit 10-Month Lows — Here’s Why a Fed Cut Might Not Help,” August 15, 2025.