Fed Delivers Second Rate Cut – Here’s What You Need to Know

The Federal Reserve has announced its second interest rate cut of 2025, reducing the benchmark Fed Funds Rate by 0.25% to a new range of 3.75% – 4.00%. This move, while expected, is stirring questions about what’s next for inflation, jobs, and mortgage rates as the year comes to a close.

Let’s break down what’s happening and what it could mean for homebuyers and the housing market overall.

Fed Cuts Rates for the Second Time This Year

The latest rate cut follows one in September, as the Fed continues to balance high inflation with a softening job market. Despite some delays in government data, the Fed noted that the overall economic picture hasn’t shifted much since its last meeting, inflation remains sticky, while signs of cooling in employment continue to grow.

Notable, two officials dissented this time: one wanted a larger cut, while another preferred no change. This split highlights the uncertainty within the Fed about how much easing appropriate.

💡Quick reminder: The Fed Funds Rate doesn’t directly control mortgage rates, but it does influence borrowing costs across the economy, from auto loans to credit cards and beyond.

Bottom line: The Fed is carefully walking a tightrope, trying to keep inflation in check without causing unnecessary strain on the labor market. Chair Jerome Powell emphasized that another rate cut in December “is not a foregone conclusion.”

Pending Home Sales Flat in September

According to the National Association of REALTORS® (NAR), Pending Home Sales were unchanged from August to September, though they still matched the second-highest pace of 2025. Compared to a year ago, contract signings were down just 0.9%, a strong sign of stability.

NAR’s Chief Economist, Lawrence Yun, shared optimism about what’s ahead: “Looking ahead mortgage rates are trending toward three-year lows, which should further improve affordability.”

Bottom line: While elevated rates in September may have cooled buyer activity, lower mortgage rates in the months ahead could boost contract signings and housing demand.

The Takeaway

The Fed’s latest decision underscores a balancing act – supporting economic growth while managing inflation concerns. For homebuyers, sellers, and borrowers, this could mean:

• A potential drop in mortgage rates if economic conditions continue to soften.
• Slightly more favorable affordability in the housing market heading into the winter months.
• Continued uncertainty as the Fed decides whether to cut rates again in December.

At TEG Federal Credit Union, we’re happy to help you stay informed about key economic updates that impact your finances and homebuying decisions. Staying connected with us can help you make the most of changing financial conditions.

---

---

More Recent Posts