Mortgage Rates Hit New Low in September 2025: What This Means for Homebuyers and the Housing Market

11 September 2025 Finance

Current Mortgage Landscape Shows Signs of Relief

As of September 8, 2025, the mortgage market has seen a notable decline, with the average 30-year fixed mortgage rate falling to 6.34%, down from 6.50% just last week.

Market Drivers and Federal Reserve Impact

This downward trend is primarily driven by market expectations of a Federal Reserve interest rate cut this month, alongside weakening labor market signals and falling Treasury yields. After maintaining the federal funds rate throughout 2025, the September meeting could be a game-changer, as Federal Reserve Chair Jerome Powell has hinted at a potential rate cut.

Housing Market Affordability

There are encouraging signs that housing affordability is improving, with mortgage rates declining, home-price growth slowing, and household incomes somewhat increasing. While conditions remain more difficult than before the pandemic, the market has shown improvement in 2025.

Expert Predictions for the Future

According to economic forecasts, the 30-year fixed rate is expected to stay between 6.5% and 7%. Fannie Mae’s Economic and Strategic Research Group projects rates will start at 6.8% in early 2025, gradually declining throughout the year, with mortgage originations and home price growth remaining relatively flat as rates stay above 6%.

Impact on Homebuyers

Many potential homebuyers are waiting for rates to drop further before entering the market. However, experts warn this could be a double-edged sword, as lower rates might attract more buyers who have been waiting on the sidelines, potentially pushing home prices higher.

Looking Ahead

The housing market is expected to see a gradual and uneven leveling process, requiring a combination of income growth, continued slowing of home price appreciation, and further drops in mortgage rates. While this process may take years, experts note that the balance of power in the market is shifting from its previous one-sided dynamic during the pandemic frenzy.