In a surprising twist for homeowners and buyers alike, mortgage rates have climbed by 20 basis points immediately following the Federal Reserve’s decision to cut its benchmark interest rate this week.
According to Mortgage News Daily, the average rate on the 30-year fixed mortgage rose to 6.33% on Thursday — up from 6.13% earlier in the week — marking one of the sharpest two-day increases in recent months.
Why Did Mortgage Rates Rise After a Fed Cut?
While it may seem counterintuitive, mortgage rates don’t directly follow the Fed’s benchmark rate. Instead, they’re influenced by bond market expectations, especially the yield on the 10-year Treasury.
The bond market had already priced in the Fed’s rate cut. However, Chairman Jerome Powell’s comments during the press conference gave investors pause. Powell hinted that while cuts could continue, the central bank isn’t fully committed to another reduction in December, tempering Wall Street’s optimism.
“The market’s enthusiasm for three Fed rate cuts in 2025 had grown a bit too large for the Fed’s liking,” explained Matthew Graham, Chief Operating Officer at Mortgage News Daily.
“Powell made it clear that another cut in December isn’t guaranteed — and that’s why yields moved back up.”
What This Means for Borrowers
Just before the announcement, mortgage rates had fallen to their lowest level in a year, sparking a refinance boom. According to the Mortgage Bankers Association, refinance applications surged 111% last week compared to a year earlier.
However, the rise in rates is now cooling enthusiasm among potential homebuyers, who remain cautious amid high housing prices and limited inventory.
The Bigger Picture
Even with the temporary jump, mortgage rates remain well below the highs of late 2023, when they topped 7%. Analysts suggest that if the Fed follows through with additional cuts in 2025, mortgage rates could gradually drift lower again — but volatility is likely to continue.
For now, experts advise homeowners looking to refinance or buy to keep an eye on Treasury yields and lock in rates quickly if another favorable dip appears.
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