WASHINGTON–The Federal Reserve announced a rate cut on Wednesday and—mortgage rates rose.
The average rate on the 30-year fixed mortgage jumped 20 basis points since Fed Chairman Jerome Powell announced rates were being reduced by 25 basis points.
It is not the first time mortgage markets have responded similarly to a rate cut and, as CNBC noted, the reason is pretty simple: The bond market had already priced in a cut, but it didn’t like the commentary from Powell.
On Tuesday of this week, the average rate on the 30-year fixed had fallen to 6.13%, matching the recent low on Sept. 16, which was the day before the Fed announced its earlier cut and marking the lowest level in a year.
Then this week, after the Fed said it would cut rates and Powell answered questions in a news conference, that rate shot up 14 basis points on Wednesday and rose another six basis points on Thursday, to 6.33%, an even 20 basis points higher than where it was Tuesday, noted CNBC.
The last time around in September, the rate on the 30-year fixed mortgage went even higher, to 6.37%, the report added.
‘A Bit Too Large’
“The market’s enthusiasm for three Fed rate cuts in 2025 had grown a bit too large for the Fed’s liking,” Matthew Graham, chief operating officer for Mortgage News Daily, told CNBC. “The market was nearly 100% certain of another cut in December. The Fed was not as certain, and Powell made it a point to say so yesterday. The result is a mild re-set in yields back to levels that are more consistent with a December cut being a solid possibility, but not a full lock.”
The recent drop in rates had caused a run on refinances, with those applications up 111% last week year-over-year, according to the Mortgage Bankers Association. Lower rates did not, however, move the needle much for potential home buyers, MSNBC added.
