The Federal Reserve is widely expected to lower interest rates at its next meeting on September 17 and 18, a move that could have significant implications for mortgage rates. As the central bank prepares to make its decision, many are wondering whether this rate cut will translate to lower mortgage rates for homeowners and potential buyers.

Currently, mortgage rates sit at around 6.2%, having dropped by a full percentage point from their May 2024 peak of 7.2%. While this decline is welcome news for those looking to refinance or purchase a home, it's essential to understand the potential impact of the Fed's interest rate decision on the mortgage market.

September Fed Meeting Preview: Officials Prepare to Cut Interest Rates

In the lead-up to the September meeting, analysts are predicting a 25-basis-point cut in the federal funds rate. This move would follow a similar adjustment at the previous meeting in July and would bring the target range for the federal funds rate to around 2.5% to 2.75%. Some experts believe that this rate cut could be just the beginning, with Morningstar's Caldwell forecasting that the Fed will continue to cut interest rates by 25 basis points at every meeting until the middle of 2025.

Biggest Winners and Losers from the Fed's Interest Rate Decision

The impact of the Fed's decision on mortgage rates will have far-reaching consequences for various sectors of the economy. For instance, homebuyers may benefit from lower mortgage rates, as their monthly payments would decrease. This could lead to increased demand for housing and potentially even drive up prices.

On the other hand, savers who rely heavily on fixed-income investments like certificates of deposit (CDs) or bonds might see their returns shrink further. This could be particularly challenging for those living off their retirement savings or relying on interest income to supplement their expenses.

The Fed's decision will also have implications for the overall economy. A rate cut could stimulate growth by making borrowing cheaper, potentially leading to increased consumer spending and business investment. However, it could also fuel inflation concerns if the economy grows too rapidly, prompting the Fed to reverse course and hike rates in the future.

Mortgage Rates Poised to Move Lower

Despite some uncertainty surrounding the exact timing and magnitude of the rate cut, many experts agree that mortgage rates are poised to move lower through the rest of 2024 and into next year. According to McBride, mortgage rates have broken below the 7% mark and are likely to continue their downward trend.

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