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At today’s economic symposium in Jackson Hole, Wyoming, Federal Reserve Chairman Jerome Powell hinted that the Fed could start cutting interest rates as soon as its September meeting.
While most eyes are on the impacts on high-yield savings accounts and certificates of deposits, lower rates could also shake up the housing market. For homeowners and prospective buyers, that raises a big question: Is now the time to refinance, or hold off? And, if you’re house hunting, what does it mean for your move?
Fed Signals and the Mortgage Market
The Fed doesn’t control mortgage rates directly, but its decisions send shock waves through the market. Mortgage rates follow the 10-year Treasury yield, which moves based on investor expectations for Fed policy. When the Fed cuts its benchmark rate, Treasury yields often drop, and lenders usually lower mortgage rates in response.
That means Powell’s comments about slowing job growth and rising recession risks could lead to cheaper borrowing if the Fed acts in September. Investors are already betting on it: bond yields fell after his speech.
Why Mortgage Borrowers Should Pay Attention
Mortgage rates remain historically elevated compared to the ultra-low levels of 2020 to 2021, but any Fed pivot toward rate cuts could create meaningful relief.
- For buyers: Even a half-point drop in mortgage rates can significantly lower monthly payments. That difference could expand your buying power or help offset today’s still-high home prices. It could even free up extra cash for groceries, bills or other everyday expenses.
- For existing homeowners: Borrowers who purchased or refinanced during the last two years at higher rates may have a chance to refinance into a lower rate later this year or in 2026. That could provide relief, especially as inflation and day-to-day living costs continue to climb.
But timing is everything. If the Fed holds steady longer than expected, rates may remain sticky.
Should You Buy Now or Wait?
Many buyers are wrestling with this question. With mortgage rates still far above the record lows of recent years, the timing of your purchase could make a real difference in your monthly payments and overall affordability.
- If you need a home soon: Don’t assume waiting will automatically get you a better deal. Rates may ease, but inventory shortages and home price appreciation could offset savings.
- If you’re flexible: Buyers not in a rush could watch the September meeting closely. A confirmed Fed pivot could provide a slightly more favorable borrowing environment by late fall.
If you’re looking into getting a mortgage, here are some of the best mortgage lenders.
Refinancing: A Strategic Play
Homeowners locked in at rates above 7% may find an opening later this year if the Fed cuts rates. However, refinancing involves costs; closing fees typically can run 2% to 6% of the loan amount.
It only makes sense if your new rate meaningfully reduces your payments and you plan to stay at home long enough to recoup expenses.
One strategy might be to get prequalified for a loan now so you’re ready to act quickly if rates drop after September, as lenders may become busier if many homeowners rush to refinance at once.
Bottom Line
Powell’s Jackson Hole comments have put mortgages back in the spotlight. The Fed’s September decision isn’t set in stone yet, but borrowers shouldn’t wait to get ready. Whether buying your first home or considering refinancing, understanding how a rate cut could affect your loan can help you act fast when the moment comes.
The imaginative play is preparation for now: review refinancing options, run the numbers under different rate scenarios, and watch the Fed closely. If policymakers cut rates in September, homeowners and buyers could finally get some much-needed relief.