As I anticipated (and probably many others too), mortgage rates moved higher after the Fed rate cut this afternoon.
Everyone knew the Fed was going to cut its own federal funds rate by 25 basis points (bps), so it wasn’t a surprise whatsoever.
And given how much mortgage rates had fallen going into this widely expected news, a little bounce higher seemed like it would probably make sense.
For the record, mortgage rates didn’t surge higher today, but they basically erased most of the big gains seen a day earlier.
So all things considered, mortgage rates remain in really good shape.
It Happened Again. The Fed Cut and Mortgage Rates Went Up
This isn’t the first time this has happened and certainly won’t be the last.
The #1 reason why is because (and yes I’m tired of repeating this) the Fed doesn’t set mortgage rates!
They set monetary policy via short-term rates to promote maximum employment and stable prices. That’s it.
Nothing in their dual mandate has anything to do with long-term interest rates, let alone consumer mortgage rates.
So whatever happens to mortgage rates on the day of a Fed rate cut (or hike) might be unrelated to the actual policy decision.
Aside from the decision, which everyone basically knew, there was the dot plot today (released quarterly) that outlines where the 19 Fed members see the FFR going by year-end and beyond.
That basically reinforced the idea of more cuts to come in 2025, which even before today looked like two more (one each in November and December).
That left the press conference, where Jerome Powell fielded questions after prepared remarks.
Long story short, Powell was Powell, meaning he was very even-keeled and said challenges remain.
“In the near term, risks to inflation are tilted to the upside and risks to employment to the downside—a challenging situation,” he said.
“With downside risks to employment having increased, the balance of risks has shifted. Accordingly, we judged it appropriate at this meeting to take another step toward a more neutral policy stance.”
Bond yields initially went down a bit on the dot plot but then jumped higher as Powell spoke.
Why? Because Powell is a staunch Federal Reserve Chair who isn’t going to give in to demands to cut rates unnecessarily. Nor make any sudden or reckless moves to fit anyone else’s agenda.
That’s why he added, “As is always the case, these individual forecasts are subject to uncertainty, and they are not a Committee plan or decision. Policy is not on a preset course.”
In other words, yeah, we might keep cutting, but only if the underlying data supports it.
That’s perhaps what sent 10-year bond yields higher today. Or maybe they just needed a breather. And as I alluded yesterday, a little sell the news action.
Mortgage Rates Already Fell a Ton Leading Up to the Cut
Now everything Powell said today was basically a given. He didn’t waver and the economic data the Fed relies upon was previously known to all of us.
We already knew labor had worsened considerably over the past few months, and that inflation continues to be a big question mark.
But that labor is taking precedence again because it’s beginning to look really ugly.
That’s exactly WHY mortgage rates fell so much over the past month. Remember, the 30-year fixed was roughly 6.625% in mid-August.
It fell to about 6.125% yesterday (mortgage rates are offered in eighths) before bouncing a bit today, per MND.
Now it’s closer to 6.25%, which is still a pretty nice move lower in such a short amount of time. It’s also a lot further from 7% than it was all year.
If you recall, it was around 7.25% in early January, so we’re about a full percentage point lower now.
And if you zoom out, mortgage rates are pretty close to three-year lows.
So sure, mortgage rates bounced as expected, but not by a ton and in the grand scheme, look pretty good still.
By the way, if you’re comparing this to last September, when mortgage rates jumped after the Fed cut, that was mostly related to a hot jobs report released shortly after.
Today, we’re dealing with a series of ice-cold jobs reports so the dynamic has shifted tremendously.
Most importantly, mortgage rates will continue to move lower if the same weak jobs data we’ve been seeing lately continues to come down the pike.
Fed Rate Cuts/Hikes Rarely Match the Direction of Mortgage Rates
September 17th, 2025: Rate cut, mortgage rates up
December 18th 2024: Rate cut, mortgage rates up
November 7th 2024: Rate cut, mortgage rates DOWN
September 18th, 2024: Rate cut, mortgage rates up
July 26th, 2023: Rate hike, mortgage rates down
May 3rd, 2023: Rate hike, mortgage rates down
March 22nd, 2023: Rate hike, mortgage rates down
February 1st, 2023: Rate hike, mortgage rates down
December 14th, 2022: Rate hike, mortgage rates down
November 2nd, 2022: Rate hike, mortgage rates UP
September 21st, 2022: Rate hike, mortgage rates down
July 27th, 2022: Rate hike, mortgage rates down
June 15th, 2022: Rate hike, mortgage rates down
May 4th, 2022: Rate hike, mortgage rates down
March 16th, 2022: Rate hike, mortgage rates UP
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.
