Why did the mortgage rates tick up just after the fed cut their lending rates.

If you are wondering why mortgage rates actually increased some after the recent fed rate cut, you are not alone.  It is a very common—question! It can feel confusing when the headlines say the Federal Reserve just cut rates, but mortgage rates actually tick up. Let’s break down why this happens:

1. Mortgage Rates Aren’t Directly Tied to the Fed Rate

The Federal Reserve controls the “federal funds rate,” which is what banks charge each other for overnight loans. Mortgage rates, on the other hand, are more closely linked to the yield on the 10-year U.S. Treasury bond. While these often move in the same direction, they don’t always move together, and sometimes they even head in opposite directions.

2. Market Expectations Play a Huge Role

If investors expect the Fed to cut rates, they may have already adjusted their behavior before the actual announcement. When the cut finally happens, it might not have much impact—or could even cause rates to rise if the market is disappointed or sees signs of inflation ahead.

3. Inflation and Economic Outlook

Mortgage rates are heavily influenced by what investors think will happen with inflation and the broader economy. If a Fed rate cut makes investors worry about higher inflation, or if economic data suggests the economy is still running hot, mortgage rates can actually rise.

4. Supply and Demand for Bonds

Mortgage rates are also affected by the demand for mortgage-backed securities (MBS). If investors pull back from buying these bonds, rates can go up—even if the Fed has just cut its rate.

In Summary

• The Fed’s moves are just one piece of a much larger puzzle.

• Mortgage rates reflect complex market forces, not just Fed policy.

• It’s common to see short-term bumps up or down after a Fed announcement as markets digest new information.