Impact of Recent US Interest Rate Cuts on Housing Market Uncertain

Sat Oct 18 2025 16:34:39 GMT+0300 (Eastern European Summer Time)

As the Federal Reserve cuts interest rates, there is speculation about how it will affect the housing market. While mortgage rates have dropped slightly, many potential buyers face challenges due to high home prices.

Recent cuts to interest rates by the Federal Reserve have sparked discussions on their potential impact on the housing market. Mortgage rates decreased, but experts caution that the affordability crisis remains. Many prospective buyers still find themselves in a competitive and expensive market, leading to doubts about significant changes in buyer activity due to the Fed's decisions.

Aileen Barrameda is planning to buy a house in Los Angeles in the coming months. Stubbornly high mortgage rates - twice what she locked in at the start of the coronavirus pandemic - are not putting her off.

If I have the means to get in the market, I might as well get in now, because homes are just going to get more expensive, Aileen said.

The cost of housing is a key concern among Americans and a political talking point. US President has raised hopes that interest rate cuts from the Fed would help Americans get mortgages.

The average rate on the 30-year mortgage, the most popular home loan in the US, fell to 6.35% last week, according to Freddie Mac. This marked the largest weekly decline in the past year and the lowest level in 11 months.

However, for buyers like Aileen, borrowing costs are not guaranteed to come down much more than they already have despite the Federal Reserve's interest rate cut on Wednesday.

The Federal Reserve's interest rate decisions do not directly affect mortgage rates. But they do affect what banks charge each other to borrow money, which influences loan costs for customers.

US banks had already cut mortgage rates in anticipation of the Fed rate cut, meaning rates may not fall significantly further. Fed chair Jerome Powell highlighted that most analysts believe it would require a substantial change in rates to significantly impact the housing sector.

Overall, economists worry that persistent inflation could counteract the benefits of lower rates, maintaining obstacles for prospective home buyers. Nicole Stewart, a real estate agent, suggests that expectations should be tempered as most of the significant changes may have already occurred.

Many homeowners secured very low mortgage rates during the pandemic and are hesitant to sell, limiting housing availability and driving prices up. Approximately 80% of mortgage borrowers have rates below the current average.

While some buyers are encouraged by slight drops in rates, the fundamental issues of affordability and limited listings are major hindrances that will not be easily resolved in the near future.

As Kristin Carlson, a first-time buyer in the Boise area points out, while recent lowering of rates offers a glimmer of hope for buyers, systemic issues within the housing market remain significant barriers to entry.