The Fed finally pulled the trigger on a long anticipated September rate cut, trimming the funds rate by 0.25% to 4.00%–4.25%. The last cut before this? December 2024.
What does that actually mean for important items like mortgages, rents, home prices, and the financial markets?
One of the most common misconceptions we see and hear is that an interest rate cut by the Fed will immediately lead to lower mortgage rates. However, history just gave us the opposite lesson, twice in a row.
Did mortgage rates really rise after the cuts?
Short answer: yes, at least in the near term.
- After the December 2024 cut, the average 30-year fixed actually rose into January before easing back down.
- Right after this September’s cut, rates bumped higher before settling again.
Why this happens: The Fed controls overnight rates; but mortgages are tied to the 10-year Treasury yield plus a mortgage-bond spread. If the bond market was pricing in bigger or faster cuts, or inflation risk resurfaces, yields can jump, pushing mortgage rates up even when the Fed is easing.
Where rates stand now versus what homeowners actually pay
- Current 30-year fixed: ~6.26%
- Blended rate on outstanding U.S. mortgages: ~4.3%
- About 80% of outstanding mortgage debt carries a sub-6% rate, with more than 20% even below 3%.
Translation: cutting the Fed funds rate doesn’t suddenly motivate owners who refinanced at 2–4% to sell. Until mortgage rates fall closer to those legacy levels, or life events force a move, inventory will remain tight. The tailwind of many consumers being locked into long term lower mortgage rates is also still providing a boost to consumer spending.
Why multifamily rents are easing while single-family prices stay sticky
Multifamily (apartments):
- The U.S. just absorbed a record supply wave, nearly 600,000 new units in 2024 with 2025 still well above normal.
- That flood of new supply is pushing national rents down modestly year-over-year, with more concessions showing up in major markets.
This matters for inflation: Shelter is the single biggest component of CPI and PCE inflation. Even if single-family home prices aren’t falling, declining apartment rents and slowing renewals are now feeding into the shelter indexes. That should gradually help continue to cool inflation data over the next several quarters and reinforce the Fed’s easing cycle.
Single-family (for-sale):
- Prices remain firm because of the lock-in effect; most owners are holding ultra-low rates they don’t want to give up.
- Builders have skewed heavily toward multifamily, leaving fewer new single-family homes to ease the large shortage.
- The exception is in overheated COVID-migration markets like Florida, where inventories are climbing and higher carrying costs, especially insurance, are forcing some price normalization.
Money Market funds: the quiet backstop for markets
A quarter-point cut by itself isn’t likely to spark a major outflow from money market funds, which still yield around 4%. But as the Fed continues to cut, yields will drift lower, and investors may start reallocating toward higher-return opportunities.
With over $7.7 trillion currently parked in money market funds, even a small rotation can provide a significant tailwind. Where does that money often go?
- Into bonds: Fresh demand from reallocating cash could stabilize Treasury and corporate bond markets.
- Into equities: Once short-term yields look less compelling, more investors may seek growth and dividends in stocks.
That dynamic provides a built-in backstop for markets as policy eases.
Our advice hasn’t changed
Whether you’re buying a home, considering a move, or thinking about reallocating investments, the playbook stays the same:
- Make decisions based on your lifestyle, time horizon, and financial plan, not the Fed’s latest interest rate move.
- Buy a home when the payment fits your plan.
- Sell when the timing works for your life, not because you think you can outguess rates.
- For portfolios, we stay focused on aligning assets with goals, not chasing headlines or timing markets.
