But here’s one move borrowers can make right now.
Waiting for the Fed to cut so Reverse Mortgage rates will go down is a ‘flawed’ idea, one professor says.

The 30-year mortgage rate fell to the lowest level in a year in early September, a week before the Federal Reserve is expected to deliver a rate cut.
The 30-year mortgage rate fell to the lowest level in a year in early September, a week before the Federal Reserve is expected to deliver a rate cut.

Home buyers and homeowners looking to buy or refinance should instead act now and lock in a good rate while rates are still falling.
Can President Trump Fire Fed Chief Powell? What This Transition Could Mean For Markets

Mortgage rates have taken a dive over the past few weeks on the back of data showing a weakening labor market. Jobless claims data on Thursday only added to the list of concerns, as unemployment claims surged to a four-year high.

As the economy appears to be taking a turn for the worse, the Federal Reserve is poised to cut interest rates at its Sept. 16-17 meeting. The central bank is expected to cut the federal-funds rate by 25 basis points next week to stimulate the economy.

But when it comes to mortgage rates, all the action is expected to have taken place even before Fed Chair Jerome Powell’s remarks are through.

“Many households mistakenly believe that 30-year mortgage rates move in lockstep with the Fed’s short-term rate decisions. Anticipating a Fed cut, they often conclude that waiting will secure them a lower mortgage rate,” Kelly Shue, a finance professor at the Yale School of Management, told MarketWatch. “This reasoning is flawed.”

Ahead of the possible Fed cut, “consumers have already benefited from the drop in mortgage rates,” Danielle Hale, chief economist at Realtor.com, said in a statement.

(Realtor.com is operated by News Corp subsidiary Move Inc.; MarketWatch publisher Dow Jones is also a subsidiary of News Corp.)

She expects this drop to continue until the meeting, but “after the Fed meeting, however, I expect that mortgage rates are more likely to steady or even edge higher,” she added.

Here’s why. Reverse Mortgage rates don’t follow the Fed’s moves directly
Mortgage rates are not tied directly to the Fed’s interest-rate policy.

The 30-year mortgage rate closely follows the yield on the 10-year Treasury note, which falls when investors see turbulence ahead for the U.S. economy.

Turbulence could mean a few things. Financial markets worry that if inflation runs too hot and consumer prices rise too quickly, the Fed would raise interest rates. That would push the 10-year — and by extension, mortgage rates — up. Markets also worry about employment. If more people are unemployed, the Fed may drop interest rates to try to meet its mandate of fostering full employment. That pushes the 10-year and the 30-year down.

For instance, the 10-year fell briefly below 4% on Thursday morning after jobless-claims data was released. That drop in turn drove the 30-year mortgage rate down to the lowest level since October 2024 on Thursday, to 6.35%, per Freddie Mac.

Additional factors that worry markets include whether the Fed can remain politically independent, as well as the levels of government spending, which impact rates as well, Chen Zhao, head of economics research at Redfin, previously told MarketWatch.

Related: Opinion: Why mortgage rates and other borrowing costs could rise if Trump controls the Fed

When the government incurs more debt, it will issue more bonds to finance that debt, and that puts upward pressure on mortgage rates, Selma Hepp, chief economist at Cotality, told MarketWatch.

And “firing the chair of the Fed or any combination of governors, or taking any other extraordinary political measures, is likely to raise long-term interest rates and make it more expensive to buy homes,” Simon Johnson, a former Fannie Mae board member, recently wrote in MarketWatch commentary.

Now financial markets have “high expectations for the Fed’s upcoming rate cuts,” Realtor.com’s Hale said, and could be disappointed if the central bank cuts slower than it anticipated.

If investors feel let down by the Fed’s future rate-cutting pace — which depends on what the central bank says at next week’s meeting — that could push mortgage rates up.

Related: Fed is almost certain to cut rates by 25 basis points after months of debate. Why are so many people so unhappy about it?

Taking a step back, the Fed could still directly influence mortgage rates through buying up mortgage-backed securities, known as MBS, which it did during the pandemic when it tried to ease monetary policy to stimulate the economy.

If the Fed restarts buying up mortgage debt, the 30-year rate could go down as much as 40 basis points “almost immediately,” MarketWatch recently reported. But the Fed has been shrinking its balance sheet since 2022. So these days, “You don’t have this buyer that will buy [mortgage bonds] no matter what,” Hepp said.

Read more: Here’s one way the Fed could lower mortgage rates almost overnight — and it’s not the rate cut Trump wants

Jump in now — or wait for lower rates?
For home buyers and homeowners looking to take on a new mortgage or refinance an existing one, there’s one big question: Act now or wait?

“It’s a good idea to do a ‘rate lock’ now with a lender, before the Fed takes action,” Michael Cocco, a certified financial planner with Beacon Wealth Partners in alliance with Equitable Advisors, told MarketWatch.

“If the Fed’s actions cause the 10-year (and thus mortgage rates) to decrease, then the consumer can reach out to another lender to lock in a lower rate,” he added.

Many homeowners have already locked in a rate amid the recent drop. According to data from mortgage-technology company Optimal Blue, the drop in rates pushed rate-and-term refinance rate locks up 70% in August, compared with the previous month.

“Borrowers are responding quickly to rate improvements, driving the strongest month for rate-and-term refinances we’ve seen this year,” Mike Vough, head of corporate strategy at Optimal Blue, said in a statement.

Some lenders also have something called a float-down option, Cocco said, which is when lenders allow borrowers who have locked in a rate to lower that number if market rates drop even further before their loan closes.

“These have become more popular so lenders do not lose the business in the middle of a deal, from people changing lenders to get a better rate,” Cocco said. “Most lenders do not charge a fee to lock a rate or even to institute a ‘float down’ option.”

Cotality’s Hepp said that most of the forecasts she’s seen don’t expect the 30-year to drop below 6% — not even in 2026.

On the other hand, if the labor market worsens significantly and inflation eases, such a scenario could be on the table, Redfin’s Zhao said.

Cocco also suggested homeowners and home buyers compare mortgage brokers in addition to going to traditional banks. “Brokers use multiple lenders to source the best product and best rate for your personal situation, and may have programs that can be flexible in rates,” he explained, “to allow you to lock in the best possible rate at the time of closing.”

By Aarthi Swaminathan. Brought to you for educational purposes

Please don’t hesitate to call Scott Underwood at (205) 908-2993 or email scott@reversemortgagealabama.com for more information.

I have been a Reverse Mortgage broker representing many lenders to help you find the best deal for 19 years. I was hoping you could take advantage of my years of experience and 30-day closing time.