Mortgage Rates Tick Up Slightly After Fed Decision

The Federal Reserve made headlines this week with its much-anticipated rate cut, trimming the federal funds rate by 0.25%. Many expected mortgage rates to follow suit. Instead, they edged higher — a move that caught some homebuyers and refinancers off guard. Here’s why it happened and what it means if you’re in the market for a home loan.

📊 What Happened

• The Fed cut its key rate by 25 basis points, bringing the target range to 4.00%–4.25%.

• Mortgage rates moved higher: the average 30-year fixed rate rose to 6.35%, up from 6.13% the week before the Fed decision.

• In short, the Fed cut short-term rates, but long-term borrowing costs — including mortgages — took a different path.

🔍 Why Mortgage Rates Went Up

It may seem counterintuitive, but mortgage rates don’t move in lockstep with the Fed’s rate cuts. A few key factors explain the uptick:

1. Mortgage rates track the 10-year Treasury yield, not the Fed rate.When the yield on Treasuries rises, mortgage rates usually follow.

2. Markets already priced in the cut.Investors expected the Fed to lower rates, so the actual announcement didn’t deliver much “new” relief.

3. Inflation and risk premiums matter.Concerns about inflation or uncertainty in the broader economy can push mortgage rates higher, even as short-term rates fall.

4. Shifts in investor demand for mortgage-backed securities.If demand softens, lenders raise rates to make those bonds more attractive.

🏠 What This Means for Buyers and Homeowners

• Locking in may make sense. If you’re close to buying or refinancing, a rate lock can protect you from further increases.

• Consider float-down options. Some lenders offer rate-lock programs that let you capture a lower rate if markets shift before closing.

• Keep shopping. Even a small difference in rates across lenders can save you thousands over the life of a loan.

• Build in flexibility. With rates still volatile, it’s smart to leave some cushion in your monthly budget.

📅 What to Watch Next

The Fed’s decision was only one piece of the puzzle. Upcoming economic reports — especially inflation and jobs data — will heavily influence where mortgage rates head next. If inflation continues to cool, we could see some relief later this year. If not, rates may hold steady or even climb.