Should you buy a home after the Fed’s big rate cut?

Homebuyers have waited for years, literally, for some economic relief. After mortgage interest rates plunged in 2020 and 2021 following the height of the pandemic, they made the opposite move in 2022 and 2023 thanks to inflation and a rising federal funds rate. The latter eventually rose to a range between 5.25% and 5.50% last summer, the highest it had been in 22 years. And mortgage interest rates followed, hitting their highest point since 2000 in August 2023.

In 2024, however, inflation has fallen significantly. And that, in large part, sparked the Federal Reserve’s decision this week to reduce the federal funds rate by a half percentage point, which was a stronger action than many economists anticipated. Before that even happened, however, mortgage interest rates preemptively reacted, hitting an average of 6.15% — the lowest in two years. The potential for further reductions is significant, too.

Against this evolving landscape, then, buyers may be wondering if they should buy a home after the Fed’s big rate cut. Below, we’ll detail three reasons why they may want to now.

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Should you buy a home after the Fed’s big rate cut?

There are some major advantages to buying a home now following the Fed’s rate cut action. By acting now, you’ll specifically:

Save money

If you had bought a home during this same week in 2023 you would have paid 7.19% on a 30-year mortgage, according to historical data from Freddie Mac. But you would pay just 6.15% on that same loan by acting now, instead. What does that mean in dollars and cents? On a $427,000 mortgage loan — the average home cost right now — it’s the difference between paying $2,895.54 per month and $2,601.40 per month. That’s a monthly savings of approximately $295, or around $106,000 saved over the life of the loan. So don’t wait.

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Less competition

While today’s mortgage rates are on the decline, they still pale in comparison to the sub-3% rates of 2020. So you may have less competition amid buyers if you act now versus waiting for additional rate cuts to come. As rates decline, more buyers will inevitably enter the market, increasing the competition for limited inventory. And a bidding war over select properties could become the norm once again. Acting now avoids that very possible scenario.

Reasonable home prices

Home prices are on an upward swing right now. But if you think that will change once rates come down and more buyers join the fray, you’d be mistaken. In that circumstance, prices will likely increase even further as sellers look to capitalize on the growing buyer market. This will make today’s home prices look reasonable in comparison to what they could be listed for in 2025. These potentially higher prices could more than negate any savings you get with another 50 basis point rate cut, too, thus emphasizing the risk of waiting to buy a home.

The bottom line

For millions of buyers, now may be a smart time to purchase a home. While today’s mortgage rates aren’t as advantageous as they were a few years ago, historically, they’re still on the low end. And by acting now buyers can potentially save significantly more than if they had acted last September instead. Combined with the growing potential for stronger competition amid buyers and another rise in home prices, for many, now could indeed be the time to act.