The Federal Reserve Cut Rates, But Mortgage Rates Climbed Instead
Last week, the Federal Reserve lowered its benchmark interest rate by a quarter point, but mortgage rates took an unexpected turn upward. This shift highlights how mortgage markets often move independently of the Fed’s official rate cuts.
The day before the Fed announced its decision, the average 30-year fixed mortgage rate dipped to its lowest level in nearly 13 months—6.37% on Tuesday. However, following the announcement on Wednesday afternoon, the rate edged up slightly and then climbed another 12 basis points to reach 6.49% on Thursday, where it has remained steady.
“As these moves were anticipated by the market, MBA does not expect any significant changes to mortgage rates as a result,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.
This outcome disappointed many buyers and homeowners who hoped for relief through lower borrowing costs. Yet experts note that mortgage rates respond more directly to investor expectations about inflation and the broader economy than to the Fed’s policy rate itself.
Key Takeaway
- The Fed reduced its benchmark interest rate by 0.25%.
- Mortgage rates rose from 6.37% to 6.49% despite the cut.
- Market expectations had largely priced in the Fed’s move.
- Mortgage rates are influenced more by long-term bond yields than by short-term Fed policy.
What Buyers Should Know
Waiting for mortgage rates to fall after a Fed announcement may not pay off. Understanding what drives long-term rates helps homebuyers and homeowners make more realistic financial plans instead of trying to time unpredictable market swings.
Author’s summary: Even after the Fed’s rate cut, mortgage rates climbed as markets had already anticipated the move—showing that broader economic forces often outweigh central bank policy changes.