Buyers still face high barriers to entry
The U.S. housing market continues to challenge first-time buyers, as home prices and mortgage interest rates remain elevated. As of August 21, the average 30-year fixed-rate mortgage stands at 6.58%, slightly below the early summer level of 6.85%, according to Freddie Mac. Despite this minor improvement, affordability remains a key concern heading into the fall.
The Federal Reserve’s next meeting in September could shift the outlook. While markets anticipate a possible rate cut, the effect on mortgage rates remains uncertain. Analysts caution that any policy move may not immediately translate into lower borrowing costs for homebuyers.
Federal Reserve decision looms large
After keeping rates steady for much of 2025, Fed Chair Jerome Powell recently signaled a potential policy change. Market indicators like the CME Group’s FedWatch tool now suggest a higher probability of a rate cut in September. Still, mortgage rates are more influenced by the 10-year Treasury yield than by the Fed’s benchmark rate alone.
“I believe the Fed will cut by 0.25% in September,” said Sarah DeFlorio of William Raveis Mortgage, citing ongoing labor market softening. However, she added that such a cut may already be priced into the market and unlikely to move mortgage rates meaningfully in the short term.
Rose Krieger from Churchill Mortgage echoed this, noting, “Mortgage rates typically follow the bond market. The Fed’s decision may have only a marginal effect.”
Experts eye late-fall shift
Despite cautious short-term expectations, experts believe further cuts later this year could improve conditions. “We still have October and December. If those bring additional cuts, mortgage rates could trend downward more noticeably,” said Shmuel Shayowitz of Approved Funding.
Fannie Mae projects rates around 6.5% by year-end and 6.1% for 2026. Shayowitz is more optimistic, suggesting a potential drop closer to 6% in the final quarter of 2025. “If we approach the 6% threshold, it could reignite buyer demand in a big way,” he said.
Falling rates could reignite competition
Lower interest rates typically reduce monthly mortgage payments, making homeownership more affordable. But they also risk triggering a surge in buyer activity, driving up prices again. “Many buyers are waiting on the sidelines for better rates. If they return at once, demand could spike and push prices higher,” warned Shayowitz.
While no one can predict exact mortgage trends, the consensus among lenders is cautious optimism. Even if the Fed acts in September, any meaningful shift in affordability may not come until late fall or winter. In the meantime, borrowers are advised to monitor market movements and maintain strong credit profiles to remain competitive.
