Financial planner warns Fed’s rate cut won’t ‘change anybody’s life overnight’ — is it too soon to refinance?

On September 17, the Federal Reserve made its first interest rate cut of 2025, lowering its federal funds rate by 25 basis points — or a quarter of a percent — to the 4%-4.25% range [1].

It’s a move that didn’t come as much of a surprise given that in August, the U.S. economy only added about 22,000 non-farm jobs [2]. For many consumers, the Fed’s rate cut is good news. Although the Fed doesn’t set consumer interest rates directly, when it lowers its benchmark rate, consumer interest rates tend to drop, too.

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There’s a reason for that. The federal funds rate determines how much it costs for banks to lend each other money overnight. When the Fed makes it cheaper for banks to borrow, the banks tend to pass those savings along to consumers in the form of lower interest rates on products that can include personal loans, home equity loans, auto loans and more.

But just because the Fed finally made a rate cut doesn’t necessarily mean you should rush to sign or refinance a loan. In fact, waiting a bit longer could work to your benefit.

Why one rate cut may not move the needle

A lot of people may be excited about the Fed’s recent rate cut, but as CNBC reports, Stephen Kates — a certified financial planner and analyst at Bankrate — called the Fed’s rate cut a “non-event [3].”

“This isn’t going to change anybody’s life overnight,” Kates added.

The reason why it may not pay to rush into a new loan or refinance is twofold. First, the Fed’s most recent rate cut was fairly minor in the grand scheme of things, as a 25 basis point cut isn’t going to create a huge drop in consumer borrowing rates.

Secondly, the Fed is expected to make two more rate cuts before the end of the year [4]. Since we’re approaching the final quarter of 2025, it could make a lot more sense to sit tight and wait to sign a long-term loan or refinance an existing one until the upcoming cuts are made.

It’s also worth noting that, in general, the impact of the Fed’s rate cuts tends to be gradual. This especially applies to mortgage rates, which do not always rise and fall in line with what the Fed does. Mortgage rates are more heavily tied to the yield on the 10-year Treasury, which has been easing since July [5].

Also, when mortgage lenders know to anticipate rate cuts, they tend to build those cuts into the rates they’re offering. That’s why you may sometimes see mortgage rates fall ahead of a Fed rate cut. Case in point: this year, mortgage rates began falling in August, well ahead of the Fed’s mid-September rate cut announcement [6].

Auto loans aren’t as long term as mortgages, so there’s a different set of considerations that go into setting those rates. Auto loan rates tend to be influenced by different factors that include the Fed’s benchmark interest rate, bonds yields and more. This means borrowers may not see lower auto loan rates for a good number of months.

Meanwhile, the Fed’s decision won’t necessarily impact federal student loans, since these rates are set on July 1 every year. These rates apply to loans given out between then and June 30 of the following year.

However, many people borrow privately for college. Those who are paying off private student loans with variable interest rates may get some relief in light of the Fed’s recent rate cut, the same way credit card APRs could drop very soon with a lower federal funds rate.

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Why it pays to wait before refinancing

If you’re thinking of refinancing an existing loan now that the Fed has lowered its benchmark rate, you should know that waiting could work to your benefit. The Fed is only scheduled for two more meetings this year — one in late October and one in early December.

Since the Fed is expected to make two more rate cuts this year, those two meetings would represent those opportunities. In light of that, you may want to hold off on refinancing a loan until late December or even early 2026.

Tempting as it may be to refinance immediately, remember that there are costs associated with refinancing a loan.

If you do so too quickly, you might miss out on the chance to lock in a substantially lower rate. And if you take on the strategy of refinancing repeatedly as the Fed continues to lower rates, you could end up losing a lot of money to closing costs — that is, if your lenders even agree to let you refinance so often.

You should also know that if you have student loans, refinancing may not make sense. With federal student loans, it’s often a poor choice to refinance in general because these loans already come with competitive interest rates. And if you refinance out of a federal student loan, you lose the protections that come with it, like forbearance, deferment and the option to use an income-based repayment plan.

If you have a variable-rate private student loan, you may find that your interest rate drops on its own now that the Fed has lowered its rate. So, before refinancing, it could pay to contact your lender and ask about what to expect.

If you’re struggling to make loan payments — whether it’s your mortgage, auto loan or student loan — the best thing to do is reach out to your lender and ask what options you have. If you’re dealing with a temporary hardship, you may be allowed to pause payments for a period of time without being reported as delinquent to the credit bureaus.

If you’re on the fence about refinancing, another good person to talk to is a financial adviser, who can help you time your refinance strategically based on economic factors as well as your own financial situation.

For example, if your credit score has room for improvement, an adviser might suggest that you spend a few months trying to boost it before applying to refinance. Even if consumer borrowing rates fall sooner than expected following the Fed’s recent rate cut, if your credit is poor, that could prevent you from getting a better deal on a mortgage, car loan or student loan.

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[1]. CNBC. “Here are five key takeaways from the Fed’s big interest rate decision”

[2]. Bureau of Labor Statistics. “THE EMPLOYMENT SITUATION — AUGUST 2025”

[3]. CNBC. “Now that the Fed cut rates, should you refinance? Experts weigh in”

[4]. Reuters. “Fed lowers interest rates, signals more cuts ahead; Miran dissents”

[5]. PBS. “What to know about the Fed’s rate cut and mortgage rates”

[6]. Federal Reserve Bank of St. Louis. “30-Year Fixed Rate Mortgage Average in the United States”

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.