Mortgage Rates After the Last Fed Cut
Here’s the thing about mortgage rates: everyone expects them to drop the second the Federal Reserve announces a rate cut. It feels logical, right? Lower Fed rates should equal lower mortgage rates. But in reality… the housing market doesn’t always play along.
Take last September as an example. At that time, the average 30-year fixed mortgage rate was hovering around 7.2%. Fast forward to today, and that number has dipped closer to 6.39%. On paper, that’s a pretty significant move. FHA, VA, and USDA loans followed similar paths, each offering a bit of relief for borrowers.
But here’s the important part: those shifts weren’t a direct result of the Fed waving its magic wand.
Why Mortgage Rates Don’t March in Step With the Fed
The Federal Reserve sets the federal funds rate, which impacts short-term borrowing—things like credit cards, auto loans, and home equity lines. Mortgage rates, on the other hand, are tied to something a little different: the bond market.
Think of it like this:
Investors buy mortgage-backed securities (MBS). These are essentially bundles of home loans.
The yields on those securities change based on investor demand. If investors are confident in the economy, yields rise, which pushes mortgage rates higher. If they’re nervous, yields fall, and mortgage rates often ease.
Inflation and expectations matter. When inflation is high, investors demand higher returns, which means higher mortgage rates. When inflation cools, mortgage rates can come down—even before the Fed makes a move.
That’s why sometimes mortgage rates anticipate what the Fed might do, or even head in the opposite direction entirely.
A Real-Life Example
Last year is a perfect case study. The Fed’s rate hikes dominated the headlines, and many homebuyers froze in place, waiting for the big drop that never seemed to come. Meanwhile, mortgage rates were moving on their own schedule, responding to economic reports, inflation data, and investor confidence.
By the time the Fed announced its most recent cut, mortgage rates had already started sliding downward weeks earlier. Buyers who sat on the sidelines, waiting for the official Fed announcement, missed some of the earlier opportunities.
What This Means for Buyers and Homeowners
If you’re thinking about buying your first home, refinancing, or even moving up into a new property, the lesson is simple: don’t pin your hopes on Fed meetings.
Yes, the Fed plays a role in the bigger economic picture. But your mortgage rate is shaped by more than just that one decision. And waiting around for “the perfect time” often means missing out.
Here’s the smarter play:
Know your numbers today. A half-point drop in rates could change your monthly payment by hundreds of dollars—or it could be the difference in qualifying for a home you really love.
Compare loan programs. FHA, VA, USDA, and conventional loans don’t always move at the same pace. One might be a better fit depending on your situation.
Keep perspective. Historically, even today’s rates around 6%–7% are still below the 30-year average, which sits closer to 8%.
A Conversation I Just Had
The other day, a client called me and said, “I’m just going to wait until rates hit 5% again. That’s when I’ll jump in.”
I get it. Everyone loves the idea of timing the market perfectly. But here’s what I told them:
If home prices climb another 5% in the meantime, waiting for that magic 5% rate might not actually save you money. You might end up paying more in the long run—either through higher prices or missed opportunities.
Sometimes the best move isn’t waiting for the “perfect” rate. It’s figuring out the best rate you can get today and locking in a home you love before prices or competition go up.
The Takeaway
Mortgage rates have come down since last fall, and yes, the Fed cut made headlines. But remember: mortgage rates have a mind of their own. They’re influenced by bonds, inflation, and investor expectations—not just what Jerome Powell announces on TV.
So if you’re serious about buying or refinancing, don’t just watch the Fed. Watch where you stand right now. The perfect time isn’t when the market says go—it’s when your finances and goals align.