“Wait, the Fed Cut Rates — So Why Did Mortgage Rates Go Up?”

When the Fed announces a rate cut, most people assume mortgage rates will instantly follow and drop. It sounds logical, right? Lower rates = cheaper borrowing. But here’s the twist that trips up buyers, sellers, and even some investors — it often works in the opposite direction, at least in the short term.

Let’s break down why that happens.

The Fed Doesn’t Set Mortgage Rates

The Federal Reserve controls the Federal Funds Rate, which influences short-term borrowing — think credit cards, car loans, and home equity lines. But mortgage rates are tied to the bond market, specifically the yield on the 10-year Treasury.

When the Fed cuts rates, it’s usually reacting to economic weakness — slowing growth, rising unemployment, or cooling inflation. But the bond market doesn’t just look at what the Fed did — it looks at why they did it and what might come next.

Why Mortgage Rates Can Rise After a Fed Cut

When investors think the Fed is cutting rates to fight off a potential recession, they may get nervous about inflation rebounding later. That fear pushes investors to demand higher yields on bonds to offset risk — and that, in turn, drives mortgage rates higher.

Another factor? Volatility.
Fed rate cuts can make markets jittery. When investors flee bonds for riskier assets (like stocks), bond prices drop — and mortgage rates, which move in the opposite direction of bond prices, tick upward.

It’s All About Expectations

Mortgage rates don’t react to what the Fed did today — they react to what markets think the Fed will do over the next 6 to 12 months. If a rate cut signals the Fed is “behind the curve” or inflation could flare up again, lenders hedge by raising rates preemptively.

In short:

• The Fed cuts rates → markets worry about inflation risk → bond yields rise → mortgage rates go up.

It’s not emotional — it’s math.

What This Means for Buyers and Sellers

If you’re sitting on the sidelines waiting for the Fed to “make housing more affordable,” don’t. The housing market doesn’t move on headlines — it moves on expectations and risk.
Timing the market based on a Fed meeting is a losing game. The smart move is to track real-time rate trends and work with a professional who knows how to read them.

If you’re buying or selling in Los Angeles or Ventura County, I can help you cut through the noise.
Let’s talk strategy — call me directly at 818.266.1100.

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Anthony Guetzoian
Broker/Owner – Century 21 Valley Properties
Fine Homes & Estates Specialist | Over 30 Years of Local Expertise