Market Update: Fed Cuts Interest Rates as Labor Market Weakens

Blog posted On September 17, 2025

The long-awaited September Federal Open Market Committee (FOMC) meeting took place yesterday and today. As expected, the Committee voted to cut interest rates by a quarter of a percentage point (0.25%), bringing the benchmark rate to a range of 4% to 4.25%. While majority of the Committee voted for this reduction, two members voted to bring the benchmark rate even lower. What does this mean for mortgage rates? Let’s explore.

Mortgage rates dropped to lowest levels in over a year…BEFORE the Fed meeting

Most people might see the news about the Fed cutting rates and think that this will directly translate to lower mortgage rates. However, in most cases, the market anticipates the Fed’s decision and mortgage rates will trend lower AHEAD of the announcement. This could explain why the average 30-year mortgage rate dropped to the lowest levels since last September yesterday.

Homeowners and buyers are jumping on lower rates

Mortgage application submissions surged 30% just last week. Refinance application submissions jumped 58% from the previous week and were 70% higher than the same week one year ago. Purchase application submissions (which are less sensitive to rate changes) inched up 3% last week.

Adjustable-rate mortgages (ARMs) are BACK

The Mortgage Bankers Association (MBA) noted that the number of people using adjustable-rate mortgages reached the highest level in 17 years. The MBA noted that “borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans.”

Mortgage rate projections for the remainder of 2025

The Fed hinted at the possibility of two more rate cuts to the benchmark interest rate throughout the remainder of 2025. What may impact mortgage rates more is the employment situation. If the labor market continues to show signs of weakness (fewer job openings, higher unemployment), it’s likely mortgage rates will continue their downward trend.

What you should do next

As we saw with this Fed meeting, mortgage rates will typically adjust BEFORE the actual Fed announcement rolls out. So, if all goes accordingly and the Fed does decide to cut the benchmark rate in the upcoming meetings this year, there are a few ways you can prepare.

1. Consider locking in your rate BEFORE the Fed meeting: Most people wait until after the Fed announcement to lock in, but by then, rates have historically trended higher. If you want to be safe, consider locking in your mortgage rate a little bit before the next Fed meeting (if the data shows rates are trending lower). We can help you decide if it’s the right time or not. Plus, it’s a win-win situation because if rates drop more, you can lower your locked rate once.
2. See if you’re eligible to refinance to a lower rate with no lender fees*: If your current mortgage rate is noticeably higher than the market rates, let us know! You could be eligible to refinance to the current mortgage rates with no lender fees through Rate Rebound.
3. See what rate you could secure with an ARM: Right now, ARMs are seeing rates much lower than the typical 30-year fixed rate, which could be a good opportunity for you if it’s the right scenario. If you’re curious about this option, let us know.

As always, we’d be happy to talk you through the options as we navigate this ever-changing market!

Sources: MBA,

*CMG Home Loans will cover all customary lender fees which are lender administrative fees, tax service fees, appraisal fee and credit report fee. This offer does not cover discount points. Credit cannot exceed total fees. Rate Rebound is only valid on future conventional conforming, government, and jumbo loans in our retail channel (future Construction Loans, All in One, HELOCs, Bond or HFA loans are excluded). Rate Rebound is only available on loans originated by CMG Home Loans. There may be additional restrictions based on investor. Offer may not be redeemed for cash or credit and is nontransferable. Offer cannot be retroactively applied to any loans. Offer may not be used with any other discounts, promotions or interest-only/buy-down and second lien products. This offer is subject to changes or cancellation at any time at the sole discretion of CMG Home Loans. Additional restrictions/conditions may apply. This is not a commitment to lend and is contingent on qualification per full underwriting guidelines. Program will be available on loans disclosed on or after 11/1/22. Program is applicable for refinances 6 months after closing up to 5 years from original note date and with a net tangible benefit which includes a rate reduction of 0.5%, going from an ARM to fixed rate, reducing loan term, movement to a more stable product, or a lower principal and interest payment. By refinancing the existing loan, the total finance charges may be higher over the life of the loan.