The Fed Cut Rates — So Why Did Mortgage Rates Move the Other Way?

This afternoon, the Federal Reserve announced a quarter-point rate cut, bringing its benchmark rate down by 0.25%.

Markets expected this move — but what caught everyone’s attention was what came next.

During the press conference, Fed Chair Jerome Powell struck a cautious tone, saying that while the economy is cooling, the Fed will base future rate cuts on data rather than setting a preset path. In other words, no promises for additional cuts yet.

At first, bonds improved slightly, but once traders realized Powell’s comments weren’t as dovish as hoped, mortgage-backed securities sold off and the 10-Year Treasury yield climbed back toward 4.0%, erasing much of the earlier improvement.

Even with the late-day volatility, mortgage rates are still near their best levels since early fall — just slightly off the week’s lows.

Here’s what this means for homeowners and buyers:

• Mortgage rates don’t move directly with the Fed’s rate cuts. They follow the bond market, which reacts to what the Fed says about the future as much as what it does today.

• A cautious Fed can cause short-term swings, but long-term stability is improving as inflation continues to cool.

• For buyers and refinancers, this is still one of the better pricing windows we’ve seen in recent months — even if the market is a little jumpy today.

  
  

The bottom line:The Fed is clearly pivoting toward easier policy, even if the path is bumpy.

Mortgage rates remain favorable, and if inflation continues to ease into winter, we could see a more consistent improvement ahead.