Why Are Mortgage Rates Going Up Even Though the Fed Cut Rates?

If you follow the news or are keeping an eye on your mortgage pre-approval, you may have noticed something confusing: The Federal Reserve cut its benchmark rate, but mortgage rates actually went up. What gives?

High interest rates can make moving plans feel out of reach. Let’s break down what’s really happening and why mortgage rates don’t always follow the Fed.

1. The Fed Doesn’t Directly Control Mortgage Rates

The Federal Reserve sets the federal funds rate — that’s the rate banks charge each other for overnight loans. It influences short-term interest rates like credit cards or auto loans, but mortgage rates are based on long-term bonds like the 10-year Treasury and mortgage backed securities (MBS).

So when the Fed cuts its rate, that doesn’t guarantee that mortgage rates will go down. In fact, long-term rates may move opposite depending on market conditions.

2. Mortgage Rates Are All About Expectations

Mortgage rates reflect what investors think will happen in the future. If they believe inflation will stay high or the economy will remain strong, they demand higher yields on long-term investments like MBS. That means mortgage rates rise.

Even if the Fed cuts rates today, if markets think inflation will persist or that further cuts are unlikely, mortgage rates may still climb.

3. What Powell Just Said Matters

After the Fed’s latest decision, Chair Jerome Powell made headlines by saying that further rate cuts are far from guaranteed in 2025:

“A further reduction in the policy rate at the December meeting is not a foregone conclusion. Far from it. Policy is not on a preset course.”

Translation? The Fed is proceeding with caution. Inflation remains a concern, and the economy is giving off mixed signals. That uncertainty makes investors nervous, which often means higher long-term rates.

4. How This Affects You — Especially If You’re Buying and Selling

If you’re planning to sell your current home and buy your forever home in the next 6–12 months, here are some things to keep in mind:

• Don’t wait for rates to drop: There’s no guarantee. Mortgage rates are reacting to bigger-picture economic forces, not just Fed decisions.

• Consider locking your rate: If you see a rate that fits your budget and timeline, it may be worth locking in. Waiting for the “perfect” rate could backfire.

• Affordability is still within reach: With the right strategy, it’s possible to make a seamless move, even in a high-rate environment. I help clients manage two mortgages, navigate timing, and negotiate for favorable terms.

5. Bottom Line

It’s totally understandable to feel discouraged when rates rise after a Fed cut. But understanding why helps you make informed, confident decisions. Mortgage rates respond more to inflation expectations and bond market dynamics than they do to the Fed’s short term rate.

If you’re eyeing a move in 2026, let’s start talking strategy now! I’ll help you navigate the timing, financing, and logistics with confidence and care.

Need a quick rate check or want to explore your options? Shoot me a text or email — I’m here to help.