The Federal Reserve Cut Rates, But Mortgage Rates Climbed Instead
Last week’s Federal Reserve rate cut grabbed headlines, yet mortgage rates moved in the opposite direction. Despite expectations of relief for borrowers, rates edged slightly higher instead of dropping.
The day before the Fed’s rate decision, the average 30-year fixed mortgage rate dropped to its lowest point in nearly 13 months—6.37% on Tuesday. Following the announcement of a quarter-point benchmark rate cut on Wednesday, rates initially rose a few basis points and then jumped to 6.49% by Thursday, where they have remained stable.
This outcome puzzled many prospective homebuyers and those considering refinancing, as they often assume mortgage rates follow the Fed’s moves. In reality, market forces and investor expectations play a much larger role in setting mortgage rates.
“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.
The key takeaway is that the Federal Reserve’s decisions influence, but do not dictate, mortgage rates. Understanding the broader market dynamics behind these rates helps buyers and homeowners make better-timed choices rather than waiting for Fed-driven drops that may never come.
Author’s Summary
Although the Fed cut its key rate, mortgage rates climbed slightly, reminding borrowers that market expectations—not Fed actions—primarily determine loan costs.