The Federal Reserve policy changes are one piece of the puzzle in how banks determine loan rates and could contribute to a trend of interest rates slowly decreasing over time.
The Washington Post
September 17, 2025 at 6:44PM
The Federal Reserve announced that it will cut interest rates by a quarter point for the first time this year – but that probably won’t mean the mortgage rate or car loan you’ve been eyeing will suddenly drop. (Alex Kormann, Star Tribune/The Minnesota Star Tribune)
If a bank is going to lend you money for 30 years, it has to anticipate how to get that money back at a market interest rate that adapts to the next 30 years of economic ups and downs, said Justin Wolfers, a professor of public policy and economics at the University of Michigan. And that’s harder to predict.
Americans who already locked into a fixed-rate mortgage – which is by far the most common type of mortgage in the United States – won’t see a change at all. That mortgage rate stays the same over the 30- or 15-year lifetime of the loan, unless they refinance.
Fixed-rate mortgage rates have already dropped slightly this year, as the labor market weakens and demand in the housing market remains somewhat sluggish.
Fed rate changes often have a more direct effect on shorter-term loans, or loans with variable rates, such as adjustable-rate mortgages. Those rates can move up and down as the Fed’s rate does.
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Alyssa Fowers, Rachel Lerman
The Washington Post
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