Sell the fact! After the Federal Reserve cut interest rates, the U.S. 30-year mortgage rate surged by 20 basis points
According to data from Mortgage News Daily, since Federal Reserve Chairman Jerome Powell announced the interest rate cut and held a press conference, the average rate for a 30-year fixed mortgage has risen by 20 basis points. This situation also occurred during the last Federal Reserve rate cut, and the reason is quite simple: the bond market had already priced in the rate cut, but the market did not like the content of Powell's speech
Despite the Federal Reserve's expected interest rate cut on Wednesday and the announcement to halt quantitative tightening starting December 1, the trend of U.S. mortgage rates has given a hawkish response.
According to Mortgage News Daily, since Federal Reserve Chairman Jerome Powell announced the rate cut and held a press conference, the average rate for a 30-year fixed mortgage has risen by 20 basis points.
This situation also occurred during the last rate cut by the Federal Reserve, and the reason is quite simple: the bond market had already priced in the rate cut, but the market did not like the content of Powell's speech.
On Tuesday, the average mortgage rate for a 30-year fixed loan fell to 6.13%, matching the recent low of September 16, which was the day before the Federal Reserve announced its last rate cut and also the lowest level in the past year.
However, this week, after the Federal Reserve announced the rate cut and Powell answered questions at the press conference, the 30-year mortgage rate jumped by 14 basis points on Wednesday and rose another 6 basis points on Thursday, reaching 6.33%, which is a full 20 basis points higher than Tuesday. During the last rate cut in September, the 30-year mortgage rate was even higher, reaching 6.37%.
Matthew Graham, Chief Operating Officer of Mortgage News Daily, stated in a client report:
"The market was overly optimistic about three more rate cuts in 2025, which does not align with the Federal Reserve's intentions. The market is almost 100% certain that there will be another rate cut in December. However, the Federal Reserve is not so certain, and Powell emphasized this point yesterday. As a result, yields have slightly adjusted back to a more reasonable level: the market believes there is still a considerable possibility of a rate cut in December, but it is not a done deal."
The recent drop in rates has led to a surge in refinancing applications, with data from the Mortgage Bankers Association showing that refinancing applications increased by 111% year-on-year last week. However, the lower rates have not had a significant stimulating effect on potential homebuyers
