Mortgage rates jump 20 basis points after Fed cut

While the Federal Reserve lowered its benchmark interest rate this week, mortgage rates responded by doing just the opposite.

The average interest rate on a 30-year fixed mortgage has jumped 20 basis points since Chairman Jerome Powell announced the cut on Wednesday and held a news conference, according to Mortgage News Daily.

This happened the last time the Fed cut interest rates as well, and the reason is very simple: the bond market had already priced in the cut, but didn’t like Powell’s comments.

On Tuesday, the average 30-year fixed interest rate fell to 6.13%, matching the lowest level recently hit on September 16, the day before the Fed announced its latest cut, and representing the lowest level in a year.

Then this week, after the Fed said it would cut interest rates and Powell answered questions at a news conference, that rate rose 14 basis points on Wednesday and rose another 6 basis points on Thursday, to 6.33%, 20 basis points higher than it was on Tuesday. Last time in September, the interest rate on a 30-year fixed mortgage rose to 6.37%.

“Market enthusiasm for 3 Fed cuts in 2025 has become too great for the Fed’s liking,” Matthew Graham, chief operating officer of Mortgage News Daily, said in a note to clients. “The market was almost 100% certain of another cut in December. The Fed wasn’t so sure, and Powell reiterated that yesterday. The result is a slight reset in yields to more consistent levels with a December cut being a strong possibility, but not a complete lock-in.”

The recent drop in interest rates has sparked a rush on refinances, with those applications rising 111% last week year-over-year, according to the Mortgage Bankers Association. However, lower interest rates have not moved the needle much for potential homebuyers.