Mortgage rates jump 20 basis points following Fed cut

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

The average rate on the 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 lowered its rate as well, and the reason is pretty simple: the bond market had already priced in a cut, but it didn’t like the commentary from Powell.

On Tuesday, the average rate on the 30-year fixed had fallen to 6.13%, matching the recent low on Sept. 16, which was the day before the Fed announced its last cut, and marking the lowest level in a year.

Then this week, after the Fed said it would reduce rates and Powell answered questions in a news conference, that rate shot up 14 basis points on Wednesday and rose another 6 basis points on Thursday, to 6.33%, an even 20 basis points higher than where it was Tuesday. The last time around in September, the rate on the 30-year fixed mortgage went even higher, to 6.37%.

“The market’s enthusiasm for 3 Fed rate cuts in 2025 had grown a bit too large for the Fed’s liking,” said Matthew Graham, chief operating officer at Mortgage News Daily, in a client note. “The market was nearly 100% certain of another cut in December. The Fed was not as certain, and Powell made it a point to say so yesterday. The result is a mild re-set in yields back to levels that are more consistent with a December cut being a solid possibility, but not a full lock.” 

The recent drop in rates had caused a run on refinances, with those applications up 111% last week year over year, according to the Mortgage Bankers Association. Lower rates did not, however, move the needle much for potential homebuyers.