Mortgage Market Update – September 2025

Each month, we bring you insights from one of the best in the business — Zack Diener of Barrett Financial Group, LLC — to help you stay informed and make confident, well-timed decisions in today’s ever-changing mortgage landscape.

The Fed Cut Rates – So Why Did Mortgage Rates Go Up?

If you’ve been following the mortgage market lately, you might be scratching your head at what happened this week. The Federal Reserve cut their benchmark rate by 0.25% on Wednesday (their first cut of 2025), but mortgage rates actually surged higher over the following two days. Mortgage rates are now back to the highest levels in 2 weeks – specifically, back to where they were the day before the September 5th jobs report.

This might seem counterintuitive, but it perfectly illustrates an important principle that many borrowers don’t understand.

Fed Rates vs. Mortgage Rates: They Don’t Move Together

Here’s the key insight from this week’s events: The Fed Funds Rate doesn’t dictate mortgage rates. The Fed Funds Rate only changes on Fed announcement days, 8 times a year, while mortgage rates change daily and the bonds that drive mortgage rates change in real-time throughout the day.

The official announcement of a rate cut is typically the least important aspect when it comes to mortgage rate impact. Instead, the bonds that determine mortgage rates are much more likely to react to the Fed’s dot plot (the chart showing each Fed member’s rate forecast over the next few years) and the press conference with the Fed Chair.

The Real Story: It’s Been a Great Few Months

Despite this week’s volatility, let’s not lose sight of the bigger picture. Mortgage rates have done almost nothing but move lower over the past 4 months. We’ve seen rates drop from the high 6% to low 7% range down to levels we haven’t experienced since late 2022.

The average lender was right in line with the lowest levels since late 2022 just before the Fed meeting, and rates hit technical “record lows” for 2025 with some lenders showing rates as low as 6.51% – the lowest since October 2024.

Jobs Reports: The Real Rate Movers

What really drives mortgage rates? Economic data – particularly jobs reports. The jobs report is the most important scheduled event each month as far as interest rates are concerned. We’ve seen this play out dramatically twice in recent months:

• The August jobs report (released September 5th) showed only 22,000 jobs created versus expectations of 75,000, causing mortgage rates to plummet back to fall 2024 levels
• The previous jobs report helped get rates down from 6.75% to 6.50% because it was much weaker than expected and revised previous months lower

Local Market Perspective

Here in Hawaii, our local banks and Hawaii-based credit unions have been reflecting these favorable national rate trends. The expertise our Hawaii-based lenders bring to island real estate transactions becomes even more valuable in volatile rate environments – they understand the nuances of properties across the islands and can help navigate the complexities while securing competitive financing.

As a local mortgage brokerage with longstanding partnerships with both local and mainland institutions, we’ve been able to help clients take advantage of the improved rate environment that developed over the summer months.

What This Means for Borrowers

The Lesson: Don’t wait for Fed announcements to make your move. The best rate opportunities often come from economic data releases – particularly employment reports – not Fed policy changes.

The Opportunity: While this week brought some rate volatility, we’re still in one of the best rate environments we’ve seen since late 2022. Volatility is a bigger risk over the coming weeks, which means acting during favorable periods makes more sense than waiting for perfect timing.

The Strategy: Focus on your readiness to buy rather than trying to time the market perfectly. Rate movements can be swift in both directions, and the current environment – despite this week’s bump – still represents significant improvement from where we started the year.

The mortgage market continues to prove that timing the perfect moment is nearly impossible, but recognizing good opportunities when they present themselves is the key to successful home financing.

Mortgage insights provided by Zack Diener, Barrett Financial Group

Zack Diener
Mortgage Loan Originator | NMLS 470413
Based in Fort Collins, CO
Serving Colorado and Hawaii
(808) 349-3777 phone
(800) 385-3630 fax
ZDiener@barrettfinancial.com
Barrett Financial Group, LLC | Corp NMLS #181106
275 E Rivulon Blvd, Suite 200, Gilbert, AZ 85297