The Fed Raised Rates. Could Mortgage Rates Still Come Down?

If you saw the news that the Federal Reserve just raised interest rates, your first thought may have been:

"Great. Does that mean mortgage rates are going up again too?"

Not necessarily.

This is one of those financial headlines that can sound much worse, or much simpler, than it actually is.

On September 16, 2026, the Federal Reserve raised its target for the federal funds rate by .25 percentage point, bringing the target range to 3.75% - 4%. The Fed specifically pointed to inflation remaining elevated as part of its reasoning. Federal Reserve Board - Federal Reserve issues FOMC statement

So what does that mean if you're thinking about buying or selling a home?

Let me break it down.

The Federal Funds Rate is Not Your Mortgage Rate

This is probably the most important thing for consumers to understand.

When you hear that "the Fed raised rates," the Federal Reserve isn't directly setting the interest rate you'll receive on a 30-year mortgage.

The federal funds rate is a short-term interest rate.

Mortgage rates are long-term and are influenced by a much larger combination of factors like inflation expectations, bond markets, economic conditions and investor expectations about where the economy is heading.

That's why the Fed can raise short-term rates without mortgage rates necessarily increasing by the same amount. Or even moving in the same direction.

Why Fighting Inflation Can Ultimately Help Mortgage Rates

Here's where things get interesting.

Inflation matters tremendously to long-term interest rates.

When investors expect inflation to remain high, they generally require greater returns to compensate for the declining purchasing power of money over time.

That can put upward pressure on long-term borrowing costs.

The Federal Reserve's latest increase is intended to help bring inflation back toward its 2% objective.  Federal Reserve Board - Federal Reserve issues FOMC statement

If financial markets become more confident that inflation will continue moving lower, that can create a more favorable environment for longer-term rates, including mortgages.

But that's an economic relationship, not a guarantee that mortgage rates will immediately fall.

So Are Mortgage Rates Going Down?

That's the question everyone really wants answered.

And the responsible answer today is:

We don't know yet.

Freddie Mac's latest weekly survey, published before the Fed's September 16 announcement, showed the average 30-year fixed mortgage at 6.76% as of September 10th. That was actually slightly higher than the previous week's 6.71%. Freddie Mac Mortgage Market Survey Archive - Freddie Mac

Rates can move quickly as financial markets digest new inflation data, employment numbers, economic growth and expectations about future Federal Reserve policy.

So I wouldn't make a homebuying decision based on the assumption that mortgage rates are definitely about to drop.

What I would do is pay close attention.

Why Even Small Mortgage Rate Changes Matter to Buyers

Mortgage rates directly affect purchasing power.

The lower your interest rate, the less it costs to borrow the same amount of money.

That can mean a lower monthly payment, or the ability to comfortably afford a home at a different price range.

Freddie Mac specifically notes that even relatively small differences in mortgage rates make a meaningful difference in payments over the life of the loan.  Mortgage rates and affordability - My Home by Freddie Mac

That's why buyers shouldn't only ask:

"What are mortgage rates today?"

A better question is:

"What would buying at today's rate actually look like for me?"

Your lender can calculate that based on your credit, down payment, loan program, taxes, insurance, and purchase price.

Sellers Should Pay Attention Too

Interest rates aren't only a buyer issue.

They're a seller issue because they affect the people who may be trying to purchase your home.

When financing becomes more affordable, buyers may gain purchasing power.

That can affect the number of buyers able to comfortably consider a particular price range.

And if you're planning to sell one home and purchase another, rates affect you from both directions.

That's why mortgage rates are one of the market indicators I continue watching for my clients.

What About Talk of an Economic Slowdown?

The Federal Reserve is trying to balance two objectives: price stability and maximum employment.

Higher short-term rates can restrain economic activity and help reduce inflation, but policymakers also have to consider the broader economy.

For housing, slower economic growth can sometimes contribute to downward pressure on long-term interest rates.

But housing prices, mortgage rates and economic growth don't move according to one simple formula.

Local inventory and buyer demand matter too, which is particularly important when we're talking about communities in Downriver like Grosse Ile, Wyandotte, Allen Park, and Trenton rather than the entire national housing market.

What I'm Watching Now

For my Buyers and Sellers, I'm paying close attention to these three things:

Mortgage Rates. Are borrowing costs beginning to improve, remain relatively stable, or move higher?

Inflation. Continued improvement would be an encouraging signal for long-term borrowing costs.

Local Housing Market Activity. National financial headlines matter, but what buyers and sellers are actually doing here in Grosse Ile and Downriver matters too.

One Fed announcement doesn't tell us where the housing market is going.

But it gives us anther piece of information.

And that's how I prefer to approach real estate decisions: not by trying to predict the market perfectly, but by understanding the information we have an making informed decisions from there.

Thinking About Buying or Selling in Downriver Michigan?

Don't let an interest rate headline automatically convince you that it's either a good or bad time to make a move.

Let's look at what the numbers actually mean for you.

If you're considering buying or selling in Grosse Ile or one of the Downriver Michigan communities, I'm happy to help you understand current market conditions and connect you with a trusted mortgage professional who can calculate what today's financing options would actually look like for your situation.

Heather Polites

Founder of the Moving Downriver App

REALTOR® at MBA Realty

9105 Maomb St, Grosse Ile, MI 48138

Mortgage rates and economic conditions change frequently. This article is for general educational purposes and is not financial or lending advice. Individual mortgage rates and qualification depend on the borrower, lender, loan program and market conditions.