Why Mortgage Rates Didn’t Fall After the Fed Cut: What Newport Beach and Costa Mesa Buyers Should Know

October 8, 2025
devinlucas

When the Federal Reserve cut rates, many Newport Beach and Costa Mesa buyers expected mortgage rates to tumble—but they didn’t. Learn why rates barely moved, what it means for home buyers and sellers, and how Lucas Real Estate Group helps you navigate today’s market.

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For the first time this year, the Federal Reserve cut interest rates—a quarter-point drop that many home buyers had been eagerly waiting for. But if you were expecting mortgage rates to fall off a cliff… they didn’t.

Yes, mortgage rates ticked down slightly. The 30-year fixed-rate mortgage averaged 6.26% this week—the lowest of the year so far, according to Freddie Mac. But that’s only a small dip, and rates are still higher than a year ago when they hovered around 6.09%.

So, why didn’t mortgage rates fall more dramatically? Let’s unpack it.

1. The Fed Doesn’t Directly Control Mortgage Rates

The Federal Reserve sets the federal funds rate, which affects how banks lend to each other—not what consumers pay on long-term mortgages.

Mortgage rates are tied more closely to Treasury yields and investor expectations about inflation and economic growth. Think of it like this: when investors expect the economy to slow down, bond yields drop, and mortgage rates often follow. But if inflation sticks around or the economy shows strength, rates stay higher.

That’s exactly what’s happening right now. The market already expected this rate cut—so by the time the Fed made its move, lenders had already priced it in.

2. Adjustable-Rate Mortgages (ARMs) Are Seeing the Biggest Benefit

While 30-year fixed loans haven’t moved much, the Fed’s action is making a more noticeable difference for adjustable-rate mortgages (ARMs).

ARMs tend to follow short-term rates more closely. That means borrowers looking at 5-, 7-, or 10-year ARMs are seeing slightly better deals—often about three-quarters of a percent lower than fixed-rate loans, according to the Mortgage Bankers Association.

And before you worry—today’s ARMs aren’t the risky, pre-2008 versions. Most now have initial fixed periods and caps on how much they can adjust. For financially stable buyers planning to move or refinance within a few years, ARMs can be a smart way to lower monthly payments.

3. Local Buyers Are Feeling It Too—Just Not All at Once

In Newport Beach, Costa Mesa, and nearby coastal markets, even a small dip in mortgage rates can create movement. We’re seeing more buyers re-engage, more pre-approvals being updated, and an uptick in mortgage applications—up about 20% year-over-year, according to MBA data.

However, that hasn’t yet turned into a surge in closed home sales. Inventory remains tight, and sellers still hold the upper hand in most of Orange County’s coastal neighborhoods.

But make no mistake—momentum is building. Lower borrowing costs, even modest ones, can improve affordability and help serious buyers finally make a move before rates bounce again.

4. What This Means If You’re Buying or Selling in Newport Beach or Costa Mesa

Buyers: Don’t wait for rates to “crash.” If you find the right property, explore options like temporary rate buydowns or ARMs to make your purchase more comfortable.
Sellers: A stabilizing rate environment is good news. More buyers are re-entering the market, and demand for well-priced homes—especially in turnkey condition—is still strong.
Investors & Trustees: Even with modest rate changes, well-located properties in Newport Beach and Eastside Costa Mesa continue to outperform. Rental demand remains high, and long-term fundamentals are solid.

The Bottom Line

The Fed’s rate cut is a positive signal—but mortgage rates don’t move in lockstep. Instead, they follow the story behind the economy: inflation, job growth, and investor confidence.

Here in Newport Beach and Costa Mesa, we’re seeing renewed optimism. Buyers are back in the conversation, and sellers who price strategically are winning. Whether rates drop further or hover in the 6% range, the key is preparation—knowing your numbers, your options, and your local market.

And that’s exactly where we come in.

Questions or Need Help?

Thinking of buying or selling real estate in Newport Beach, Costa Mesa, or the surrounding Orange County coastal communities?
We’d love to help.

949-478-1623
info@lucas-real-estate.com

At Lucas Real Estate Group we offer a full-service approach to real estate—combining sales, legal, and tax expertise under one roof.

We help sellers position their homes for maximum value, guide buyers with smart negotiation strategies, and assist property owners with full-service management, trust, and LLC structuring.

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About the Authors

Devin R. Lucas — REALTOR®, Real Estate Attorney & Broker
Courtney Lucas — REALTOR®, CPA & Real Estate Advisor

Together, they lead Lucas Real Estate Group, serving Newport Beach, Costa Mesa, and surrounding communities with unmatched legal, tax, and market insight.

Sources:

Freddie Mac Weekly Mortgage Market Survey (Sept. 18, 2025)
Mortgage Bankers Association (MBA) Weekly Application Survey
National Association of REALTORS® (NAR) Existing Home Sales Data

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