The Federal Reserve’s next rate decision on March 19, 2025, has been a hot topic for financial markets and homebuyers alike. While some are hoping for relief from high interest rates, the data suggests the Fed is unlikely to cut rates this month. Let’s talk about the impact to mortgage rates and the housing market in Denver.

But the bigger question for homebuyers is: How will the Fed’s future rate cuts impact mortgage rates? Let’s break it down. First watch this video to get more education on what happens to mortgage rates with rate cuts;

Will the Fed Cut Rates in March 2025?

Market Expectations for a March Rate Cut

According to the CME FedWatch Tool, the probability of a rate cut on March 19, 2025, is extremely low—around 2–3%. That means markets overwhelmingly expect the Fed to keep rates unchanged at 4.25%–4.50%.

Traders and economists now anticipate the first rate cut to happen later in 2025—most likely by June or September. Some analysts believe the Fed may hold rates steady even longer if inflation remains elevated.

Key Economic Indicators Driving the Fed’s Decision

The Fed’s policy is data-driven, meaning it will only cut rates if key economic indicators support easing monetary policy. Here’s what they’re watching:

1. Inflation Trends

• Inflation is still above the Fed’s 2% target.
• The latest data shows consumer prices rising ~3% year-over-year as of January 2025.
• Fed Chair Jerome Powell has stated that the Fed will not cut rates until it’s confident inflation is durably declining.

2. Employment and Wages

• The job market remains strong, with unemployment around 4.0%—historically low.
• As long as job growth continues, the Fed has little urgency to cut rates.

3. Economic Growth (GDP)

• U.S. GDP grew at 2.3% in Q4 2024, down slightly from 3.1% in Q3.
• While growth is slowing, the economy is not currently in recession, reducing the Fed’s need to stimulate with rate cuts.

4. Financial Market Conditions

• Mortgage rates and Treasury yields have already started easing in anticipation of future Fed cuts.
• If financial conditions tighten significantly, the Fed may act sooner—but so far, markets remain stable.

Bottom Line: The Fed is unlikely to cut rates in March 2025 but may start easing later in the year, depending on inflation and economic data.

How Will a Future Fed Rate Cut Impact Mortgage Rates?

Even if the Fed cuts rates later this year, mortgage rates don’t move in lockstep with Fed policy. Here’s what homebuyers need to know:

1. Mortgage Rates Don’t Always Drop When the Fed Cuts Rates

• Mortgage rates are influenced by long-term bond yields, not just the Fed’s short-term rate.
• In some cases, mortgage rates actually rise after a Fed cut if markets fear inflation or higher borrowing demand.
• Example: In late 2024, the Fed cut rates twice, but mortgage rates temporarily increased from 6.1% to 6.8% before gradually falling again.

2. Mortgage Rate Trends in Early 2025

• Mortgage rates peaked in late 2023 at over 7% but have eased down to ~6.6% in early March 2025.
• Analysts predict that if the Fed cuts rates later in 2025, 30-year mortgage rates could gradually decline toward 6% by year-end.

3. Home Affordability and Buyer Demand

• If mortgage rates decline, housing affordability improves, making it easier for buyers to qualify for loans.
• Lower rates could bring more buyers back into the market, leading to increased home sales in the second half of 2025.
• However, rising demand may also push home prices up, offsetting some of the affordability gains.

4. Refinancing Opportunities

• Homeowners who locked in high rates in 2023–24 may see opportunities to refinance at lower rates later in 2025 or 2026.
• Refinance activity has already started picking up as rates have eased from their 2023 highs.

Should You Buy a Home Now or Wait for Lower Rates?

If you’re planning to buy a home in 2025, here’s what to consider:

Buy Now If:

• You find the right home at a fair price.
• You want to build equity sooner rather than later.
• You’re comfortable refinancing later if rates drop.

Wait to buy a home if:

• You’re banking on mortgage rates dropping to the low-5% range, which may take time.
• You’re flexible on timing and willing to see how the market shifts later in 2025.

Final Thoughts: What to Expect for Mortgage Rates in 2025

• The Fed is unlikely to cut rates on March 19, 2025.
• Markets expect the first Fed rate cut to happen in mid-to-late 2025.
• Mortgage rates have already eased slightly and could drop further if the Fed cuts later this year.
• Homebuyers should be prepared for gradual, not dramatic, changes in mortgage rates.

If you’re in the market for a home, focus on what you can control—your budget, loan strategy, and long-term financial goals. Waiting for perfect conditions may cost you an opportunity in today’s market.

Looking for expert mortgage guidance? Contact us at Mortgage Maestro Group to discuss your financing options! Or fill out an application and start the pre-qualification process