Why Did the Fed Rate Cut Lead to Higher Mortgage Rates?

Fed Cut Rates… So Why Are Mortgages More Expensive? 😵

 

📊 Why Did the Fed Rate Cut Lead to Higher Mortgage Rates?


The Fed cut rates by a quarter point, so why did mortgage rates jump instead of falling?  Many assume that these rate cuts directly lower mortgage rates, but that’s not how it works. Mortgage rates actually follow the bond market, specifically the 10-year Treasury yield, not the Fed’s short-term rate.  The Fed’s long-term outlook changed yesterday, and the markets reacted to this negative news—pushing mortgage rates higher.
 



🔍 Here’s What Happened:

 

📈 Inflation Outlook:
The Fed expects inflation to persist into 2025, pushing Treasury yields and mortgage rates higher.

🤔 2025 Rate Cut Expectations:
The Fed reduced its 2025 rate cut projections from four to two, signaling less aggressive cuts ahead.

🏛️ New Administration:
Uncertainty around tariffs and the new administration’s economic policies.  
 

💭 My Take:


The Fed seems lost as they are unclear how the new administration’s policies will play out. They are now signaling fewer rate cuts than originally expected, which means higher interest rates are here to stay for most of 2025. Despite elevated mortgage rates this year, LA County still experienced a 7% price growth.  So, what does this all mean? Don’t wait for a market crash, it’s not likely to happen. 

 

📞 Ready to Take the Next Step?


Jeremiah Vancans
Real Estate Agent
Vancans Group | Compass

jeremiah@vancansgroup.com
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