Why Mortgage Rates Went Up After a Fed Rate Cut (and What It Really Means for You)

If you’ve been watching the headlines lately, you probably did a double-take:
​“The Fed cut rates… but mortgage rates went up?” 

It feels backwards, right? After all, isn’t the Fed supposed to lower borrowing costs?

Here’s the truth — not all rates are created equal, and not all rates move in the same direction for the same reasons. The relationship between the Fed and mortgage rates isn’t a straight line…it’s more like a dance where one partner moves in real time, and the other only steps eight times a year.

The Real Story: Timing and Expectations

The Fed’s “rate” applies mostly to overnight loans between banks — debt that’s measured in hours, not decades. Mortgage loans, on the other hand, are based on long-term bonds that investors trade daily.

So while the Fed makes decisions eight times a year, mortgage rates can shift multiple times per day as investors react to new information about the economy, inflation, or policy expectations. 

When the Fed finally announced this most recent rate cut, the market had already priced it in weeks ago. The real shock came after the announcement — during Fed Chair Jerome Powell’s press conference. Powell hinted that another rate cut in December was “far from guaranteed.”​
That subtle change in tone immediately shifted investor expectations, and the result was an instant jump in mortgage bond yields (and therefore, mortgage rates).

In other words: the market doesn’t just respond to what the Fed does — it reacts to what it expects the Fed might do next.

Why This Week’s Rate Move Isn’t as Scary as It Sounds

Yes, mortgage rates bumped up this week, but not as dramatically as national headlines might make it seem. Freddie Mac’s weekly survey didn’t even capture the mid-week spike (their data cuts off before the new numbers hit). More importantly, rates are still hovering in a range that’s been historically normal. The 30-year fixed is sitting around the low-to-mid 6’s — not the 7’s and 8’s we saw last year. And while “6%” might not sound like a dream rate, the difference between 6.2% and 5.99% on a $400,000 loan is roughly $50 a month. That’s about the price of a couple of coffee runs or a DoorDash order.

But here’s the kicker: if you wait for that magical sub-6% number, you could easily lose that $50 — and more — to rising home prices once everyone else jumps back in.

The Psychology of the “Magic Number”

According to the National Association of Realtors (NAR), “A 30-year fixed rate of 6% would make the median-priced home affordable for about 5.5 million more households—including 1.6 million renters.” If rates drop below 6%, experts predict that hundreds of thousands of new buyers could flood back into the market within 12–18 months.

When that happens, two things follow quickly: 

1. More competition
2. Higher home prices 

So while you might lock in a slightly lower rate by waiting, the cost of the home itself could rise enough to erase any savings.

Why Acting Now Could Be the Smart Play

Jessica Lautz, NAR’s Deputy Chief Economist, summed it up perfectly: 
“Over the last 5 weeks, mortgage rates have averaged 6.31%. This has provided savvy buyers a sweet spot to reexamine the home search process with more inventory, widening their choices.”

And Matt Vernon, Head of Retail Lending at Bank of America, added:
“Rather than waiting it out for a rate they like better, hopeful homebuyers should assess their personal financial situation—if the house is right for them, and the upfront and monthly payments are affordable, it could be the right chance to make a move.”

That’s the mindset I encourage all my clients to take: focus on the home and the payment, not the headline number. You can always refinance later if rates dip — but you can’t rewind time and buy at today’s prices or with today’s negotiating leverage.

The Bottom Line

Mortgage rates rise and fall for reasons that don’t always match the news cycle.
Yes, the Fed cut its rate — but mortgage rates live in a different world, one ruled by expectations, timing, and investor psychology.

If you’re interested in learning more, reach out! I'm always happy to have a no pressure conversation.