There’s a reason last week’s newsletter carried the oh-so-catchy title: “The Fed is Cutting Rates Next Week, But Not Mortgage Rates.”
Turns out, we called it.
Mortgage rates actually jumped higher after this week’s Fed rate cut—a plot twist worthy of a soap opera. And yes, it confused a lot of people. Let’s untangle this mess.
SHORT VERSION (for those who prefer the movie trailer to the full film):
- The Fed Funds Rate (the thing the Fed sliced this week) does not control mortgage rates.
- The Fed only changes its rate 8 times a year, and only on announcement days.
- Mortgage rates? They’re like caffeinated squirrels—darting around daily, sometimes hourly, based on economic news and bond markets.
- So, when the Fed cut rates, mortgages had already made their move earlier, like the overachievers they are.
- Translation: Fed rates and mortgage rates both react to the same economic forces, but mortgage rates are just faster on their feet.
LONG VERSION (for the brave souls still with me):
We actually have a whole explainer on this: “No, The Fed Hike/Cut Doesn’t Mean Anything For Mortgage Rates.” (Catchy, I know.)
ABOUT THOSE NEWS STORIES SAYING RATES ARE LOWER THIS WEEK…
Some headlines on Thursday declared that mortgage rates were “lower this week.” Cue dramatic record scratch.
Here’s what really happened: Freddie Mac’s weekly survey reported rates dropped from 6.35% to 6.26%. Sounds great, right? But…
- That survey is an average of the previous Thursday through Wednesday.
- Four of those five days were before Fed day.
- And wouldn’t you know it—those four days just happened to feature the lowest rates we’d seen in ages.
So yes, technically, the “average” was lower. But by the time those cheerful headlines hit the internet, actual rates had already bounced much higher.
BOTTOM LINE:
If you erase the week or so leading up to Fed day, rates are still at their lowest in 11 months. 🎉
But right now—at this very moment—rates are higher than they were in that happy pre-Fed window. And Wednesday + Thursday’s spike? Yeah, that one was especially spicy.