The Federal Reserve Cut Rates, But Mortgage Rates Climbed Instead—Here’s What You Need to Know
Last week, the Federal Reserve lowered interest rates, yet mortgage rates did not follow the same downward path. Understanding the factors influencing mortgage rates is crucial for buyers and homeowners planning their finances.
Mortgage Rate Trends Around the Fed Rate Cut
On Tuesday, the day before the Fed's rate cut, 30-year mortgage rates dropped to 6.37%, the lowest in nearly 13 months. However, after the Federal Reserve’s announcement on Wednesday afternoon, mortgage rates increased slightly, then surged by 0.12 percentage points to 6.49% on Thursday, remaining stable at that level since.
Why Mortgage Rates Didn’t Fall
The Fed reduced its benchmark interest rate by a quarter point, but mortgage rates moved higher instead of dropping. Many buyers and refinancing homeowners had hoped for lower rates, yet the market reacted differently.
“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.
Key Takeaway
The Federal Reserve’s rate decisions do not directly set mortgage rates. For those waiting for mortgage rates to decline following a Fed cut, it's important to understand the broader factors influencing mortgages to plan realistically rather than attempt to time the market.
Additional Information
- Mortgage rates are monitored and reported every business day.
- The relationship between Federal Reserve policy and mortgage rates is complex and indirect.
- Market anticipation plays a strong role in mortgage rate movements.
Summary: While the Federal Reserve cut interest rates, mortgage rates rose due to market expectations and other factors, highlighting the need for realistic planning over timing the market.