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# The Fed Held Rates Steady — So When Will Mortgage Rates Actually Come Down?
- URL: https://www.mortgagemomradio.com/the-fed-held-rates-steady-so-when-will-mortgage-rates-actually-come-down/
- Published: 2023-09-20T21:00:00.000Z
- Updated: 2026-09-04T17:33:49.000Z
- Description: The Fed left the funds rate at 5.25–5.50% on September 20, 2023, and finally published projections: 5.6% by year end, 5.1% in 2024, 3.9% in 2025. Debbie reads Powell's statement, explains the nine-month lag, and maps the real timeline from pre-approval to the refinance you're counting on.
- Author: Deborah Marcoux
- Tags: Podcast, Mortgage Mom Radio, #episode-backfill

Mortgage Mom Radio • Live show from Wednesday, September 20, 2023 • 71 minutes • Hosted by Debbie Marcoux, NMLS #237926

The Federal Reserve left the federal funds rate unchanged at its September 20, 2023 meeting — and for the first time in a long while, it published a real projection of where rates go next. Debbie reads Chair Powell's opening statement in full, translates the dot-plot numbers into plain English, and then answers the question everyone actually cares about: if cuts are coming, when should you start getting ready, and how long will you be making the payment you sign up for today?

## Key takeaways

- **Rates held, but the Fed still signaled one more hike.** The target range stayed at **5.25–5.50%**. The committee's median projection put the federal funds rate at **5.6% at the end of 2023** — which means one more quarter-point increase before year end.
- **The projections point to cuts in 2024 and more in 2025.** Median federal funds rate: **5.1% at the end of 2024** and **3.9% at the end of 2025**. Compared with the June projections, the end-of-year number was unrevised but the next two years moved up by half a percentage point — higher for longer.
- **Every Fed move takes about nine months to show up in the economy.** That came straight out of the press conference, and it's why Debbie doesn't expect early-2024 cuts. Her read: the first real cuts land in the **third or fourth quarter of 2024**.
- **The moment cuts start, the market stampedes.** Millions of homeowners sitting on 2% and 3% rates finally list, but far more buyers come off the sidelines at the same time. More inventory, much more demand, more multiple offers — and prices push back up. Buying *before* that is the advantage.
- **Do the calendar math before you count on a refinance.** Start a pre-approval today, allow a month or two to find a home and 30 days to close, and your first payment is March 1, 2024\. Debbie doesn't expect a full percentage point of improvement — her threshold for a refinance being worth the cost — until roughly **mid-2025**. That's 13 to 14 payments at the rate you signed up for.
- **“Marry the house, date the rate” only works if the payment is affordable now.** Debbie's hardest line of the show: do not stretch into a payment you can't carry, on the assumption a refinance rescues you in six months. It won't be six months.
- **If your lease ends in May, start your pre-approval in January.** Working backwards from a move-out date is the whole game plan — and as of this show, that's only three months away.

## Chapters

- 02:00What today's show covers: the Fed's decision and your timing
- 08:00Chair Powell's opening statement, read in full
- 11:00Where inflation actually stands: PCE and core PCE
- 14:00The dot plot: 5.6% this year, 5.1% in 2024, 3.9% in 2025
- 18:00Q&A: how are VA rates right now?
- 27:00Why the nine-month lag matters more than the headline
- 29:00Debbie's forecast: one more hike, then cuts late in 2024
- 34:00Q&A: isn't inventory the real problem, not rates?
- 37:00Lower rates release inventory — and unleash far more demand
- 40:00Get in before the first rate cut, not after
- 44:00The trouble with “buy now, refinance later”
- 50:00Q&A: what about new construction?
- 56:00When is a refinance actually worth the cost?
- 59:00The real timeline: pre-approval in September, first payment in March
- 66:00Q&A: will my property taxes be reassessed after I buy?
- 68:00Wrap-up and how to catch the next live show

## Questions answered on this show

### “How are VA rates right now?”

VA rates are consistently the lowest of any loan program on the market, and Debbie's view is that a VA loan is simply the best mortgage available to anyone who earned it. Zero down payment. A seller can be negotiated into paying all of your closing costs, and in the right deal can even pay off some of your debts to help you qualify. What she won't do is put a rate number on the air: every borrower gets a different rate depending on down payment, credit score, and whether the property is a single-family home, a condo, a duplex, or a three-to-four unit. The rate you're quoted is built from your specific file, not from a headline.

### “Lower rates would be good, but isn't inventory the bigger problem?”

They're the same problem. Inventory is at the lowest level Debbie has seen, and the reason is rates: homeowners holding mortgages in the 2s and 3s won't trade them for today's rates, so the normal life-stage moves — upsizing, downsizing, stepping from a single-family rental into a two-to-four unit — simply aren't happening. That lock-in is what's keeping prices elevated even through rate increases. Rates have to come down to release inventory. The catch is that the same drop releases a much larger wave of buyers, so supply improves and competition gets worse at the same time.

### “What about new construction?”

New construction has been carrying the market precisely because resale inventory is so thin, and Debbie likes it — new everything, and you pick your finishes. Two cautions. First, the reports out that week showed *fewer permits* being pulled by builders for future construction, so the gap new homes have been filling may narrow again nine to twelve months out. Second, budget honestly: landscaping, a backyard, window coverings and other basics are often not included, and they're paid out of pocket after closing. For a first-time buyer scraping together closing costs, paying slightly more for a resale home where those things already exist — and financing them as part of the purchase — can be the cheaper path in practice.

### “My property will be reassessed after I buy — will that blow up my payment?”

It shouldn't, if the loan is set up correctly from the start. A supplemental tax bill is normal after a purchase, and a well-structured impound account collects more than the seller's old tax bill precisely because the reassessment is coming. When the supplemental bill arrives, you can forward it to your lender to pay out of the excess already sitting in escrow. Where borrowers get hurt is with lenders who set the account up off the seller's numbers — the escrow runs negative, the payment jumps, and the supplemental bill lands on top. It's an avoidable problem, and it's avoided at origination.

### Build your game plan before the market moves

Call [844-935-3634](tel:8449353634) (844-WE-LEND-4), [start an application](https://www.mortgagemomradio.com/apply/), or run your numbers with the [mortgage calculators](https://www.mortgagemomradio.com/tools/). Get the weekly rate rundown in the [newsletter](https://www.mortgagemomradio.com/newsletter/).

Full transcript (lightly edited for clarity) 

*Auto-generated captions cleaned for readability. Sponsor messages, commercial breaks, and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page.*

### What today's show covers

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, I am the Mortgage Mom, and today we're talking about the Fed meeting — the fact that they did not change interest rates, that they held them steady at today's meeting. I'm actually going to read you the statement released by the Federal Reserve, because I do not want to misconstrue anything. I want you to hear it the way it was put out there, and then we're going to talk about it.

They also gave us projections for what they're anticipating for 2024 and 2025\. So then we're going to get into: have you been sitting on the fence? Have you been waiting to get pre-approved? Have you been waiting to sell your home and buy another because you don't want to jump into the higher interest rates we have in today's market? When should you start thinking about doing that? What's the right timing? And news alert — it is already September the 20th. You wouldn't think about it, but tax returns are right around the corner, so this is a great time to start thinking about your 2024 plans.

This is an interactive show. I want you to ask your questions, tell me you're here, say hi. The best questions I get are the ones from my listeners, because then I know I'm answering things people actually want to hear.

### Chair Powell's opening statement

*Debbie read the Federal Reserve chair's opening statement from the September 20, 2023 press conference on the air. Her summary of it follows; the commentary in brackets is hers.*

The committee remains focused on its dual mandate: maximum employment and stable prices. Since early last year the FOMC has significantly tightened the stance of monetary policy — they have raised the policy interest rate by five and a quarter percentage points and continued to reduce their securities holdings at a brisk pace. \[Yeah — like sixteen times, right?\] They have covered a lot of ground, and the full effects of that tightening have yet to be felt.

Today they decided to leave the policy interest rate unchanged and to continue reducing securities holdings. Looking ahead, they are in a position to proceed carefully in determining the extent of additional policy firming that may be appropriate.

On the economy: recent indicators suggest activity has been expanding at a solid pace, and growth in real GDP this year has come in above expectations. Activity in the housing sector has picked up somewhat, though it remains well below levels of a year ago, largely reflecting higher mortgage rates. \[You all have got to just stop spending.\] In the summary of economic projections, participants revised up their assessments of real GDP growth, with the median for this year now at **2.1%** and the median for next year at **1.5%**.

The labor market remains tight, but supply and demand are coming into better balance. Over the past three months payroll job gains averaged **150,000 per month** — a strong pace, but well below what we saw earlier in the year. The unemployment rate ticked up in August but remains low at **3.8%**, and the median projection has it rising to **4.1%** over the next two years. \[So they are expecting unemployment to get a little bit worse because of everything they've done.\]

On inflation: it remains well above the longer-run goal of 2%. They estimate PCE prices rose **3.4%** over the twelve months ending in August, and core PCE — excluding food and energy — rose **3.9%**. Inflation has moderated somewhat since the middle of last year and longer-term expectations appear well anchored. Nevertheless, the process of getting inflation sustainably down to 2% has a long way to go. \[And yeah — a long way to go. We don't like to hear that.\] The median projection for total PCE inflation is **3.3% this year**, falling to **2.5% next year** and reaching **2% in 2026**.

They see the current stance of policy as restrictive, putting downward pressure on economic activity, hiring and inflation. \[So they are trying to get you to stop buying as much, stop consuming, stop hiring as many people. It seems strange that that's supposed to help with inflation — but think about it. If people can't go out and readily buy anything at any price someone asks, prices start to come down. How does that happen? People have to have less money in their pocket. They're pinching us. They're pinching us on purpose. That's my interpretation.\]

In light of how far they have come, the committee decided at today's meeting to maintain the target range for the federal funds rate at **5.25–5.50%**.

### The projections: 5.6%, then 5.1%, then 3.9%

Here's the part we're going to build the rest of the show on. In the summary of economic projections, the median participant projects the appropriate level of the federal funds rate will be **5.6% at the end of this year**. So they're saying we are going to increase rates at least one more time.

Then **5.1% at the end of 2024**. If we go from 5.6 to 5.1, that looks like two decreases in 2024\. And **3.9% at the end of 2025** — so it actually looks like 2025 is where we see the majority of the cutting.

Compared with the June projections, the median is unrevised for the end of this year but has moved up by half a percentage point for each of the next two years. And they were clear: these projections are not a committee decision or a plan. If the economy does not evolve as projected, the path adjusts. They will keep making decisions meeting by meeting.

### Q&A: how are VA rates right now?

Sam asks: *“How are your VA rates currently, for my heroes?”*

Our VA rates are great. In my opinion, VA loans are by far the very best mortgage loan available today. If you're a vet, you earned it — you served, you were honorably discharged. Zero down payment. You can get a seller to pay all of your closing costs if that's something you're able to negotiate. You can get a seller to pay off some of your debts to help you qualify, if that's something you're able to negotiate. And VA interest rates are better than any other loan program out there.

What I won't do is throw a specific rate out on the show, because every single person gets a different interest rate. Different down payment, different credit score, a different kind of property — a single-family home versus a condo versus a duplex versus a three- or four-unit. All of the circumstances surrounding your purchase are what set your rate.

### The nine-month lag

One thing that came up in the questions afterward that I think is really important for you to hear: every time the Fed makes a change, we don't typically see the impact of that change for **nine months**.

So at this meeting they held rates steady — no further increase — because they've done a lot of increases over the last sixteen months, and it's been insane. Five and a quarter points from where we were. That is a substantial change, and it was very, very quick. Right now we're paused and they're going to see what happens, because it takes time for the effects to take place in the economy.

However, they're saying they still plan to increase interest rates at least one more time, by another quarter point, before the end of this year. That could be at the next meeting in November — most likely November. There's one more meeting in December. Remember they meet about every six weeks: September 20th, then early November, then mid-December. My guess is we see that bump in November.

### Debbie's forecast: don't expect early-2024 cuts

Then they're talking about holding steady and waiting the nine months to see how the changes have affected the economy. Is inflation coming down? Is it doing what it was supposed to do? For 2024 they're talking about two rate cuts.

I would love to be the super-positive person right now and say: cool, everybody who bought a house this year and at the end of last year gets to refinance at the beginning of 2024\. Realistically, that's probably not what's happening. My opinion — and this is Debbie Marcoux the Mortgage Mom, from what I watch and read, my interpretation — we're probably going to see mid-to-end of year before the real cuts start. If we're still going to increase one more time in 2023 and we're already at the end of the year, I don't foresee them changing rates in early 2024\. I do think second half, even third quarter into fourth quarter, is where we start to see the cutting begin. And that is what's going to mobilize the troops who want to buy homes.

I don't have a crystal ball. I'm not a financial advisor. I'm giving you what I've seen over 29 years of doing this and where my head is.

### Q&A: isn't inventory the real problem?

Josie says: *“Lower interest rates will be good, but inventory I believe is needed more than lower rates.”*

I agree that inventory is an absolute disaster right now — we've got the lowest inventory levels I believe we've ever had. There is just nothing for sale, which is making it difficult for home prices to come down. It's keeping prices elevated. If anything, we've seen continued appreciation in home values rather than declines, even with interest rate increases.

But the two go hand in hand. People are not selling their homes right now because they have interest rates that are sub-3%, or at minimum sub-4%. There are many, many people out there with rates in the 2s and mid-3s, and they are not willing to give those up to go purchase — even though they've outgrown the home they're in, even though maybe it's time to downsize out of the big house. People make moves throughout life, but they're not making them now, because giving up the rate means a much higher rate and a much higher payment on the next house. That's why inventory is so low.

So we actually need interest rates to come down to create more inventory. That's what gets people back into their normal cycles — upsizing, downsizing, the investor who wants to move from a single-family rental into a two-to-four-unit property but can't make the rents cover the mortgage at today's rates.

### More inventory, much more demand

More inventory sounds fabulous. More to choose from, prices might stabilize or even come down. But think about this for a minute: how many people are on hold right now?

Earlier in the show someone said he feels priced out — that buying a house is unobtainable. A lot of people feel that way, and they're waiting for rates to come down before they start looking. And there are a lot of people, as I mentioned, with great rates and great payments whose house is just too small or too big, or who want an investment property but can't make the rent cover the payment. They're all on hold.

So as rates come down we'll see more inventory — but we're going to see a massive increase in demand, and there still will not be enough inventory to cover it. There is a shortage of housing, period, end of story. There simply isn't enough housing for the number of people we have in the U.S. So we're going to see a much tighter, harder market: more competition, more multiple offers, harder to get an offer accepted.

And keep in mind what heavy demand with not enough inventory did in 2020 and 2021: values went up. So even if rates come down, if prices rise with them, mortgage payments end up relative to where they'd be today at today's prices and today's rates.

### Get in before the first cut

I'm sure you've heard every loan officer and every real estate agent say “buy now, refinance later” — marry the house, date the rate. I agree with that to an extent. If you are ready to buy, now would be the time, versus six months from now.

The gentleman earlier who said things were unobtainable just signed a lease that's up in May. I'd tell you he is actually on a perfect timeframe to execute in May. Because if we start to see rates come down toward the end of 2024, you want to be in something *before* those first cuts happen. The first sign of cuts is when every single person out there gets excited, gets pre-approved, and jumps back into the market.

If your lease is up in May, you should be getting pre-approved in **January**. Think about the calendar: it's September 20th. It takes a couple of months to get pre-approved, find a property, get an offer accepted, get into escrow, go 30 days through closing. To be closed by the time your lease ends in May, you really need to start in January. That means you've got October, November and December — three months — to get the game plan together.

Reach out and find out: is your credit where it needs to be? Do you have the down payment you need? There are VA loans with zero down, FHA loans with 3.5% down, conventional loans with 5% down, self-employed borrower programs for people without traditional tax returns. Do you have money saved? If not, let's talk about down payment assistance, or whether you can pull from a 401(k) or IRA. Do you own a home now? How much equity do you have, and where do you want to go? I want you to hear what's possible *for you* — not for your neighbor, not Mom's opinion, not Dad's opinion. If you don't know, you'll never execute the plan.

### The trouble with “buy now, refinance later”

Here's where I want to circle back. Loan officers and agents have been saying “marry the house, date the rate” for a year and a half now, under the impression that rates would go high and then come right back down, and a refinance would be waiting to drop the payment. I have watched many buyers jump into mortgages at payments much higher than they're comfortable with, expecting to refinance within six months, or eight, or at the outside a year.

It was never going to be a year. The Fed literally said each change takes about nine months to show its effects on the economy. They've been raising rates for sixteen months — it started in 2022 and we're almost at the end of 2023\. This was never going to be short and fast.

So no matter what, if you can purchase now it is best for you on the price of the property. But we have to make sure you're budgeting appropriately and getting into a payment you can afford — one that is sustainable for you until a time when you could actually refinance.

### Q&A: what about new construction?

Josie asks: *“How about new construction?”*

New construction has been off the hook, and it's directly because resale inventory is so low — people are flocking to new homes. But the latest reports came out earlier this week, and it looks like there have been *fewer permits pulled* by new home builders for future building. Still a steady pace, but definitely fewer than before. Builders are pulling permits now for what they'll build next year, so we might actually be a little short on new construction nine to twelve months from now.

Really, new construction or resale, it doesn't matter what you purchase — it's the fact that you purchase. I love new construction. I think it's awesome to walk into a brand-new home that's yours and pick your colors and pick your everything. What can be difficult is coming up with the additional money for landscaping and window treatments if the builder isn't including them.

That's harder on a first-time buyer with limited funds who is barely scraping together closing costs. Sometimes we can get into new construction for less than a comparable resale home — but there's no backyard, no pool, no window coverings, a lot that isn't done yet. Paying a little more for a resale home where you can finance all of that as part of the purchase, instead of paying out of pocket after closing, can be very helpful. New construction has been a great source of extra inventory this past year. Just plan the true, full cost of it.

### When is a refinance actually worth it?

In 2025 they're talking about continuing to cut through the year, ending in 2026\. Rate cuts come in quarter-point increments — and we all know the federal funds rate is not directly connected to mortgage rates, I've talked about that on numerous shows, but they do correlate and they do move together.

So here's an easy way to think about it. Say an interest rate today is 7%. I'm not quoting you — I'm giving you a number to follow. Say that by December 31, 2024 they've reduced the federal funds rate by half a point. Realistically, a mortgage rate that started at 7% might be somewhere in the ballpark of 6.5% or 6.25% by the end of 2024\. If you purchased at 7% and rates are at 6.5% or 6.25%, that may not be a big enough change to make the refinance worth it.

Because there is a cost to a refinance. You're going to hear a million people say “buy from me today and I'll do your refinance at no cost later.” There is always a cost. You might not see it in the paperwork — you'll see it in the interest rate. Or you'll see a better interest rate and you'll see the cost on the paperwork. But nobody is doing it for free, and please take that from me. What we want is for the reduction in your monthly payment to more than offset that cost. We don't want to refinance too fast or too soon.

If they continue cutting through 2025, my best guess — again, no crystal ball, not a financial advisor, just 29 years of this — is that by **mid-2025** mortgage rates are down by about a full percentage point. If today's rate is 7%, mid-2025 is somewhere around 6%. Dropping a full point is absolutely the time to do that refinance.

### The real timeline, start to finish

So what does that mean? It is September 20, 2023 today. If you call my office today to start your pre-approval, how long that takes depends on you — however fast you get me what I need is however fast I can move. Sometimes I get them done in a day; sometimes it takes weeks.

Let's say seven days. You do the application online, you go to work, you come home, the next day you upload some documents, but you can't find the W-2, so the day after that you find it and upload it. Now it's September 27th — beginning of October, you're ready to look. It takes a month or two to find the right property for you and your family, so now it's end of November, beginning of December. Now you're in a 30-day escrow, so you're not closing until end of January. Close any day in January and your first mortgage payment is due **March 1, 2024**.

And we're talking about realistically having the ability to refinance in June of 2025\. So you need to be sure that for that period — the next 13 to 14 months — the house you're buying and the payment you're committing to is one you're fully comfortable making. That is the most important piece of this whole thing, and it's what drives me crazy about the “buy now, refinance later” excitement. People bite off more than they can chew, expecting smooth sailing in six months.

But go back to the other half of it: if the first cuts start in the third or fourth quarter of 2024, that starts the stampede of buyers and sellers. If you have the ability to purchase something before that, you'll definitely want to do it — into something affordable for you now, and refinance it for an even better payment later.

### Self-employed? You have five months

Timing is now. You've got to get ahead of the herd, because once people hear about that very first rate reduction — which is closer than you think — they're going.

And if you're self-employed and you're not sure what to do about your tax returns to get ready for a pre-approval: it's September 20th. You'll be filing come February. October, November, December, January, February — five months. Five months to get prepared, to know exactly what the game plan is and what you need to do to qualify for a full-documentation loan. There's so much to keep in mind right now, but execution now is really the best timing. Definitely get started right after the first of the year if you want to beat the craziness.

### Q&A: property tax reassessment after you buy

Sam raises a good point: *buyers must realize the property will be reassessed after they buy, so they should set aside the money they're saving during those first months.*

Yes, they're going to get reassessed and get a supplemental tax bill. But we usually do a really good job, when doing the mortgage, of setting it up from the beginning so we're collecting enough taxes for that reassessment. They shouldn't end up in too bad a shape. They might get a small bill, and they can send that supplemental tax bill to the lender to have the lender pay it, because there should be excess funds in the escrow account — we set it up correctly.

There are a lot of lenders who don't set it up correctly, and those borrowers end up negative in the escrow account, their payment goes up, *and* they have a supplemental tax bill. It's all about getting it set up accurately from the beginning: collecting more than what's needed based on the seller's tax bill, so that once the reassessment and supplemental bill arrive, there's more than enough sitting there.

### Wrap-up

I hope I brought you the information you were looking for and gave you some good timing. I see a light at the end of the tunnel and I'm excited — now is the time to get started and get prepared. If you're in a lease ending in May, the longest you could possibly wait to get pre-approved is January.

How do you reach me? Call 844-935-3634 — that's 844-WE-LEND-4\. Same number to text the word LIVE and get one message a week letting you know I've gone live, so you can jump on YouTube and get interactive with us. Head over to mortgagemomradio.com — don't forget the “radio” — for the calculators, the newsletter and a way to send me your questions. I'm off next Wednesday with the family, but I'll be back the week after. Have a fabulous rest of your week. Talk to you all real soon.

Debbie Marcoux is licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, NMLS ID #237926, and additionally licensed in AZ (0941504), FL, GA, HI, ID, IL, NV, NC, OR, TN, TX, and WA. Rates and figures discussed were current as of the air date of September 20, 2023, reflect national conforming averages, and are not an offer of credit or a rate quote. Debbie Marcoux is not a financial advisor; consult qualified professionals about your individual situation.