Jaime’s Real Estate Brief

How the Fed’s Rate Cut Impacts Mortgage Rates—and Why Home Prices Matter More

The Federal Reserve made headlines this week with its first rate cut since last year, a quarter-point trim, with projections for two more cuts in 2025. Naturally, everyone wants to know: Does this mean mortgage rates will keep falling?

The short answer: Not necessarily.

Why the Fed Doesn’t Directly Set Mortgage Rates

A common misconception is that the Fed “controls” mortgage rates. In reality, mortgage rates tend to follow the 10-year Treasury yield, which reflects investor confidence in the broader economy and inflation outlook. While the Fed’s policies influence those trends, they’re not a direct lever.

Historically, even when the Fed has lowered its benchmark rate, mortgage rates haven’t always followed. Last year, for example, the Fed cut rates multiple times—yet the average 30-year mortgage rose back above 7% by early this year.

Today, the average 30-year mortgage sits around 6.3%–6.4%, according to Freddie Mac and Realtor.com data. Analysts don’t expect rates to fall below 6% this year.

The Bigger Factor: Home Prices

Here’s the real story buyers need to pay attention to: house prices.

Over the past decade, home prices have risen nearly 50% nationally (CoreLogic data). On Long Island, demand is even more intense due to limited land, high construction costs, and lifestyle-driven demand for suburban living. Lower rates, while welcome, can actually accelerate price growth because they bring more buyers back into the market.

Think of it this way:

• A 0.25% rate drop might save you ~$75 a month on a $400,000 mortgage.

• But if that same house rises by 5–10% in value because more buyers jump in, that could cost you tens of thousands upfront.

In other words, waiting for rates to drop can cost you more in the long run if prices rise faster than rates fall.

Where We’re Headed

Most forecasts suggest mortgage rates will hover in the mid-6% range through the end of the year, with small fluctuations depending on inflation and the job market. Meanwhile, housing inventory remains historically low…keeping upward pressure on prices.

On Long Island, demand is especially strong around transit-oriented developments, 55+ communities, and storage/secondary-use properties that make daily life easier and support community growth. These are areas I’ve been actively developing and watching closely, because they tell the true story of where our market is moving.

My Advice

If you’re serious about buying, don’t focus solely on rates. Look at the big picture: inventory, prices, and whether the home fits your needs. For many buyers, the smarter move is to buy the right home now…then refinance later if rates trend lower.

As always, I’m here to provide insight, data, and strategies to help you make the best decision in today’s evolving market.

— Jaime Hechtman Ulloa

Patriot Real Properties

631.664.0268

Jaime@PatriotRealProperties.com