Lowest rate we’ve seen in 10 Months
Fed Cuts Interest Rates for the 2nd time in 2025
The Fed has cut interest rates for the fourth time this year, leaving the national average 30-year fixed mortgage APR at 6.17%. Many economists are also predicting another rate cut going into 2026.
Interest rates significantly affect affordability as higher interest rates reduce purchasing power when it comes to overall loan amount.
Mortgage companies determine monthly payments by calculating Principal & Interest + Taxes & Insurance.
Mortgage providers will not lend over 28% (or up to 36%) of your total monthly income toward housing expenses. So for example, if you make $5,000 a month, your total PITI housing expense should not exceed $1,400 (or up to $1,800). This protects consumers from becoming “house broke” and the potential for default.
If more of your monthly housing expense must be allocated toward interest, than naturally less can be applied to principal, thus purchasing power is diminished.
Owner Refinancing and Recasting
While a lower Fed Rate is great news for potential homebuyers, it could also prove beneficial for existing homeowners who hold higher interest rates or adjustable rate mortgages reflecting greater housing affordability.
Many homeowners may consider refinancing, especially if their current interest rate is above 7%. Refinancing does have costs associated with it, so depending on your goals for your property refinancing may or may not be a wise investment. Additionally, many mortgage providers have requirements around length of time the mortgage must be held.
You may also consider recasting your mortgage. This is different than a refi as nothing except the amortization schedule changes. Many lenders require a significant lumpsum payment (often $10k or more) in order to be eligible for a recast.
Talk to your mortgage provider about your options and what would work best for your situation.