Fed cuts interest rates, but mortgage rates actually went up? It's not that simple

【BlockBeats】Recently, mortgage rates have started to plummet again, but this decline has been bumpy and far from smooth.

Many people think that when the Federal Reserve cuts interest rates, mortgage rates will follow suit. Actually, that’s not quite how it works. The Federal Reserve controls the federal funds rate, which is a short-term interest rate. The most common mortgage for homebuyers—30-year fixed-rate loans—are tied to the 10-year U.S. Treasury yield. These two are fundamentally different things.

How does the 10-year Treasury yield move? It depends on market expectations. If the market believes the economy will recover and inflation is coming, bond yields go up; if there’s concern about recession and risk aversion, yields fall. So, you’ll see a very strange phenomenon—despite the Fed cutting rates in September, mortgage rates actually increased. Why? Because at that time, the market was uncertain: was this rate cut the start of a cycle or a one-time move? With so much uncertainty, bond yields began to fluctuate, and mortgage rates naturally jumped around.

Will the upcoming Federal Reserve meeting repeat this kind of scenario? It’s hard to say. But one thing is certain: the meeting results will shake up the 10-year Treasury market, and mortgage rates will likely fluctuate for a while afterward.

Whether you’re an investor watching the market, a homebuyer preparing to buy, or a homeowner already carrying a mortgage, everyone is concerned about where interest rates are heading. But honestly, at this point in time, changes in rates may not have a significant impact on the housing market. It’s the end of the year, everyone is busy shopping for gifts and planning gatherings—who has time to look at houses? The real estate market has a pattern: holidays are the off-season, and things usually pick up again in the spring. So, the key factor might be the interest rate trend over the next few months.