After the Federal Reserve cut interest rates, U.S. mortgage rates rose instead of falling. Analysts: The FOMC policy outlook is the key
After the Federal Reserve cut interest rates, mortgage rates in the United States actually rose. Analysts point out that the future economic direction and the outlook for Federal Reserve policy will determine the cost of home buying. The 30-year fixed mortgage rate rose from 6.27% to 6.33%. Despite the rise in rates, the current level is still better than at the beginning of the year. Market reactions have been mild, and the willingness to buy homes is affected by the uncertainty of the economic outlook. The Federal Reserve's rate cut failed to drive down mortgage rates, instead, comments from Chairman Powell led to a weakening of market expectations for further rate cuts
According to the Zhitong Finance APP, after the Federal Reserve's interest rate cut, U.S. mortgage rates have risen instead of falling. Analysts point out that the impact of short-term fluctuations is limited, and the economic direction and Federal Reserve policy outlook in the coming months will be the key factors determining the cost of home buying in early 2026.
According to Mortgage News Daily data, on Wednesday (after the FOMC meeting), the average rate for a 30-year fixed mortgage in the U.S. rebounded by 0.14 percentage points to 6.27%, and further increased to 6.33% by Thursday noon. If this increase continues, it will be reflected in the national average mortgage rate data released by Freddie Mac next week. Due to the overall declining trend in mortgage rates previously, Freddie Mac's data this week still shows a slight drop in the average rate to 6.17%.
Although mortgage rates have risen, the current level is still better for potential buyers compared to earlier this year. For example, with a $400,000 loan, if a borrower exited the market at the end of July (when the 30-year mortgage rate was about 6.7%), they could still save about $100 in monthly payments by re-entering the market now.
However, the market impact of interest rate changes is becoming milder. Major U.S. homebuilder PulteGroup stated earlier this month that although lower rates typically boost demand, the recent response from buyers has been "significantly more subdued" due to uncertainties in the economic outlook and concerns about job stability weakening home buying willingness. As November progresses, real estate transaction volumes are already cooling due to seasonal holiday effects, making it even harder for small fluctuations in mortgage rates to shake the market.
In the bond market, the Federal Reserve announced on Wednesday a reduction in the benchmark interest rate and the end of quantitative tightening (QT), but the yield on 10-year U.S. Treasury bonds rose instead, pushing mortgage rates higher. Walter Schmidt, Senior Vice President of Mortgage Strategy at FHN Financial, pointed out that the rebound in mortgage rates is not driven by interest rate cuts or policy adjustments, but rather influenced by comments from Federal Reserve Chairman Jerome Powell.
At the post-meeting press conference, Powell stated, "Further rate cuts at the December meeting are not a foregone conclusion." This statement significantly cooled market expectations for rate cuts. According to the CME FedWatch tool, the probability of another rate cut in December dropped noticeably after Powell's remarks.
Schmidt explained that market expectations for future economic trends and monetary policy paths directly influence the direction of 30-year fixed mortgage rates. "When Powell questions the rate cut in December, he is effectively shaking the market's confidence in multiple future rate cuts."
Therefore, the economic data and Federal Reserve statements in the coming months will be crucial in determining the direction of mortgage rates in spring 2026. "The issue is not just about December, but the persistence of the entire rate cut cycle," Schmidt said. "The long-term policy path is the true barometer for determining home buying costs."
