📈 Fed Cuts Rates — But Mortgage Rates Rise? Here’s Why.

marketing928870
Oct 30, 2025
2 min read

Updated: Dec 30, 2025

Yesterday, the Federal Reserve announced a 0.25% rate cut, aiming to ease borrowing conditions and support economic growth. But if you were expecting mortgage rates to drop right along with it, you might’ve been surprised because mortgage rates actually went up. — Yesterday, the Federal Reserve announced a **0.25% rate cut**, aiming to ease borrowing conditions and support economic growth. But if you were expecting mortgage rates to drop right along with it, you might’ve been surprised because **mortgage rates actually went up.**

Confused? Let’s break down what’s really happening behind the headlines. 👇

💡 The Real Reason: Mortgage Rates Follow Bonds — Not the Fed Directly

While the Fed’s benchmark rate affects short-term lending (like credit cards and home equity lines), mortgage rates are tied to the bond market, especially the 10-year Treasury yield.

When investors expect stronger growth or lingering inflation, they demand higher returns on bonds. That pushes bond prices down and mortgage rates up even when the Fed cuts its own rate.

So when Fed Chair Jerome Powell said that another rate cut in December “isn’t guaranteed,” investors interpreted that as caution, not confidence. The bond market reacted immediately, and mortgage yields ticked higher.

📊 In Short:

The Fed cut short-term rates.
But investors adjusted their expectations for future cuts.
That caused bond yields (and mortgage rates) to rise slightly.

This dynamic shows how the mortgage market reflects long-term sentiment, not just Fed decisions.

📰 Mortgage Headlines:

MarketWatch: “Why mortgage rates are rising even after the Fed cut interest rates.”
CNBC: “Bond market turns lower after Powell signals fewer cuts ahead.”

📈 Bottom Line:

Even when the Fed moves to ease monetary policy, mortgage rates can still climb if markets sense persistent inflation or stronger-than-expected growth.

Understanding this connection helps buyers and homeowners make smarter financial moves because in real estate, timing isn’t just about when the Fed cuts, but how the market reacts.

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