If you’ve been following the headlines since the Fed’s September rate cut, you’ve probably wondered if this means mortgage rates are finally coming down?
The short answer? Not exactly, but the story behind it is worth understanding.
The Fed Doesn’t Control Mortgage Rates
Here’s what’s actually happening. The Federal Reserve sets the federal funds rate — that’s the short-term rate banks charge each other to borrow money overnight. It influences the broader economy, but it doesn’t directly dictate mortgage rates.
Mortgage rates respond instead to inflation, bond yields, and what investors think the Fed will do next. That’s why you often see rates shift before the Fed even makes an announcement. By the time a cut is official, the market has already priced in much of that expectation.
How Rate Movement Affects Buyer Behavior
Even small changes in mortgage rates can shape buyer demand. A quarter-point drop, like we saw in September, doesn’t change affordability overnight, but a clear downward trend can shift psychology — and that’s often what affects the real estate market.
When rates ease, we tend to see more showings, more offers, and quicker sales. When they rise, buyers pull back. Properties sit longer. Negotiations stretch out. Sellers feel the difference.
Yes, Even in a Cash-Heavy Market
In northern New Mexico, about half of vacation-home purchases are cash. When financing becomes more attractive, the number of active buyers can double almost overnight. Those loan-backed buyers increase buyer demand. As we always say, everything comes back to supply and demand.
And cash buyers? They’re watching too. Many are investors weighing returns. When yields on bonds or CDs fall, those investors look to real estate.
Where We’re Headed Next
Economists don’t expect a dramatic drop, but they do see gradual improvement ahead. Fannie Mae projects the 30-year mortgage rate will average about 6.4% by the end of 2025, then drift toward 5.9% by the end of 2026.
That’s a slow, steady climb down — not a plunge.
Still, it won’t be a smooth ride. Sticky inflation or nervous financial markets could push rates higher again, even if the Fed continues cutting short-term rates.
If inflation continues to cool and the economy softens, rates should ease further. But if inflation surprises to the upside, we could see temporary spikes. It’s a bumpy road, not a straight descent.
What This Means for Sellers
Mortgage rates shape demand — plain and simple. And in vacation-home markets, that demand is what drives momentum.
When rates dip enough to bring buyers back, the market reacts quickly. Homes move faster. Offers get stronger. When they rise, things slow down.
Rates are volatile and unpredictable, but they’re still a key piece of your timing strategy. Understanding how they influence buyer behavior helps you decide when to sell — and how to position your home when you do.
Ready to Talk Strategy?
If you’re thinking about selling your vacation home, this is a great time to talk strategy. We’ll walk through what these shifts mean for your specific property, how to price smartly, and how to time your move for the strongest results.Because while you can’t control mortgage rates, you can control how prepared you are when the market moves.