-
The Federal Reserve cut its benchmark (federal funds) rate by 25 basis points to a target range of 4.00%–4.25%. This was the first rate cut this year, driven by concerns about weakening job growth and rising downside risks to employment.
-
Despite the rate cut, mortgage rates have not fallen in the short term — in fact, some have edged up. For example, according to Mortgage News Daily, the average rate on a 30-year fixed mortgage rose to 6.22%, an increase of about 0.09 percentage points.
-
A major reason is that mortgage rates are more influenced by longer-term interest rates (notably Treasury yields and mortgage-backed securities markets), which did not drop immediately after the Fed announcement — or in some cases moved in the opposite direction due to market interpretations.
- So why aren’t mortgage rates falling after the Fed lowered their rate?
-
The Fed controls short-term interest rates (like the overnight rate), but mortgages are priced based on longer-term bond yields (10-year Treasuries, mortgage-backed securities, inflation expectations, etc.). If those yields stay high or rise, mortgage rates often won’t fall — or might even increase.
- So bottom line: the Fed cut its short-term rate, but mortgage rates — tied to longer-term rates and market expectations — haven’t dropped immediately, and in some cases are slightly higher.
