Mortgage Rates Tick Lower After Fed Move. What It Means for Home Sales.

(ROBYN BECK/AFP via Getty Images)

Key Points

• Mortgage rates, as measured by Mortgage News Daily, decreased by 0.05 percentage point to 6.3% on Wednesday.
• The 10-year Treasury yield, which influences mortgage rates, fell following the Federal Reserve’s 0.25 percentage point rate cut.
• The housing market’s acceleration will likely be clearer in the spring selling season, starting in late January.

Prospective home buyers are set up for good news following the Federal Reserve’s decision to cut interest rates. The 10-year Treasury yield, a barometer for mortgage costs, was heading lower Wednesday afternoon.

Mortgage rates measured by Mortgage News Daily fell 0.05 percentage point to 6.3% on Wednesday. The decline came after the 10-year Treasury yield dropped following the central bank’s announcement that it would reduce its fed-funds rate by .25 percentage point.

Mortgage rates have eased in recent months—though it hasn’t been a smooth run. Wednesday’s afternoon reading was higher than the prior month’s low of 6.2%, but down significantly from highs above 7% earlier this year.

The Fed doesn’t directly control mortgage rates with its federal-funds rate. Rather, the popular 30-year fixed mortgage rate moves with the 10-year Treasury yield , which is influenced by future expectations for the economy and monetary policy.

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That means that mortgage rates sometimes move out of step with the Fed’s decision to cut or hold short-term interest rates steady. In September, for example, the fed-funds rate cut came with uncertainty about future cuts, which drove mortgage rates higher.

Investors, home buyers, and homeowners alike keep a close eye on mortgage rates because they’re one of the main determinants, along with a house’s price, of homebuying costs. Cash-strapped buyers may be better positioned to afford a home when mortgage rates drop, while homeowners who bought when rates were higher, such as when the 30-year fixed mortgage rate scraped 8% in 2023, can save money by refinancing.

Lower rates are a plus for buyers at any time of year, while higher levels are an impediment—but a change in mortgage rates right now might not carry as much importance for the trajectory of the housing market as it will in a couple months.

That is in part because house hunters are typically more focused on buying presents than houses right now. The housing market’s seasonally slow period typically lasts through the holiday season before beginning to pick up in the new year.

“The real tell for whether the housing market can accelerate will be the spring selling season, which starts in late January,” Douglas C. Yearley, Jr., the CEO of luxury home builder Toll Brothers, said on a recent earnings call.

By then, investors should have more information about where monetary policy is likely to head in the coming years. Powell’s term ends in May, and the Trump administration is expected to announce his successor in January, Barron’s previously reported.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com