Derek McGowan explains why mortgage rates climbed after the Fed cut rates today. The Fed lowered its rate to 4.00%, but Jerome Powell's comments about uncertain future cuts spooked the market. Long-term mortgage rates rose because investors suddenly expected fewer rate cuts ahead.
4.25%
4.00%
25 basis points (0.25%)
96% likelihood
September 17 (prior cut referenced)
So the Federal Reserve cut rates today. The mortgage rates jumped higher. How does that work? If you're confused, you're not alone. Let me break it down. This is not the first time it's happened. Let me show you the charts. So ultimately, what you need to know, Red is bad. If you want to see it in pictures, this is mortgage rates the last handful of business days. So you can see that they've been in this range. And then the Fed met today and bam, they went higher. Now here's the interesting part. So, so the Federal Reserve rate was 4.25. The forecast was that they would cut a quarter % down to 4%. That's exactly what they did. That's the actual rate that came in at 4% for the federal Reserve interest rate, however. So this was already priced into the mortgage market. Leading up to today's Fed meeting, everyone knew the Fed was going to cut the 96% likelihood. However, Jerome Powell, the Fed chairman, said that rate cuts in December are far from a foregone conclusion. That's not what the mortgage market likes to hear. We knew they were going to cut today. It's all about, what new information are you going to give? Oh, the Fed's not feeling comfortable about future rate cuts. That's what the mortgage market has a problem with and that's why they've jolted higher. This is not the first time that's happened. Look at the last Fed rate cut. This is in September, September 17, the Fed cut rates and look what happened to mortgage rates during that time. September 15th, rates were already at their lowest in anticipation for the Fed to cut. They'd already priced that in and then rates actually went higher the next week after the Fed to cut rates. So again, the Federal Reserve, their rates are short term. They impact credit cards, auto loans. Mortgage rates are long term. They look at inflation outlooks and the reason to tie it all together. The Fed's only going to cut rates in December. If they feel like inflation's under control, they're pulling back. They're getting a little bit, you know, more conservative on their upcoming rate cuts. That's not what the mortgage market likes to see. So the mortgage market unfortunately has been cushioning against that. And rates jumped higher today in it is a volatile time. We are navigating people through that. So reach out. But the headlines for the Fed rate cuts does not mean mortgage rates got better.
