Why Are Mortgage Rates Rising Despite Fed Rate Cuts?

The Federal Reserve has lowered interest rates twice this year, including another quarter-point cut last week, but mortgage rates don’t seem to be getting the memo. Instead of dropping, they’ve been steadily climbing, which might have you scratching your head if you’re in the market to buy or refinance.

Here’s the thing: mortgage rates don’t follow the Fed Funds Rate as closely as other types of loans, like credit cards or auto loans. Instead, they’re more influenced by the 10-year Treasury bond yields, which take their cues from things like inflation expectations, the overall economy, and even investor sentiment. Lately, those Treasury yields have been rising, thanks to concerns about inflation, government spending, and a strong economy, and that’s pushing mortgage rates higher. On top of that, the extra premium investors demand for mortgage-backed securities has been widening, making it even more expensive to borrow.

So, when will rates start coming back down? It’s tough to say, but it’s not likely to happen overnight. A slowdown in the economy or easing inflation could help, but it’s going to take time for those factors to align. Big moves in mortgage rates typically follow big economic shifts, and while the Fed’s cuts might help in the long run, they’re not the magic switch many people hope for.

If you’re trying to decide whether to buy a home or refinance, my advice is simple: focus on what you can afford right now, not on where rates might go. Waiting for a drop can backfire—if rates do fall, home prices could go up because more buyers jump into the market. And remember, the rate you lock in today isn’t forever. You can always refinance down the road if rates improve.

The bottom line? Don’t try to time the market. If you’re ready to buy and can afford the payment, now is as good a time as any to take the plunge. The opportunity to adjust later will always be there, but the home you want might not be.