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You’ve probably heard it everywhere: “I’m waiting for rates to come down before I buy.”
But here’s the truth — the Federal Reserve cutting interest rates does not necessarily mean that mortgage rates will follow.
That might sound surprising, but it’s not unusual. And it’s exactly why informed buyers — the ones paying attention — are making moves now, while others wait for a “mortgage rate miracle” that may not happen anytime soon.
Why Mortgage Rates Aren’t Falling (Even Though the Fed Is Cutting)
1. The Fed Doesn’t Set Mortgage Rates
When the Fed cuts rates, it’s lowering the short-term rate banks use when lending money to each other overnight — not mortgage rates.
Mortgage rates are long-term and move based on what investors expect to happen with inflation and economic growth over time.
Even if the Fed lowers its rate, mortgage rates can rise if investors believe inflation will stay high or the economy will remain strong.
2. Mortgage Rates Follow the 10-Year Treasury Yield
Most 30-year fixed mortgage rates move closely with the 10-year Treasury yield — a key indicator for long-term borrowing costs.
If investors demand higher returns on these bonds (because they expect more inflation or risk), mortgage rates increase too — even when the Fed is easing policy.
This is why the connection between Fed cuts and mortgage rates is often weaker than most people think.
3. Inflation Is Still Sticky
Inflation remains one of the biggest drivers of mortgage rates. If inflation doesn’t cool off meaningfully, lenders will continue pricing loans higher to protect the long-term value of their returns.
That means even with Fed cuts, mortgage rates may hold steady — or even rise slightly.
4. Markets Move Ahead of the Fed
By the time the Fed actually cuts rates, financial markets have usually already adjusted. Investors act on expectations, not just official announcements — which means rate cuts rarely cause an immediate drop in mortgage rates.
What Smart Buyers Understand About Today’s Market
Here’s what today’s strategic buyers know:
- The market is continuing to appreciate. Home prices are continuing to rise at ~10% YoY. The sooner you buy, the sooner you can start to benefit from this growth.
- Timing the market matters more than timing the rate. Buying now — even with a higher rate — can be smarter than waiting for both prices and rates to rise again later.
- You can always refinance. When rates eventually come down, today’s buyers can refinance. But they’ll already own the home they wanted — likely at a better price.
In short, smart buyers are acting now not because rates are perfect, but because the net benefit of doing so is higher than waiting for perfect conditions that may never come.
The Bottom Line
The Fed can influence short-term borrowing costs, but mortgage rates move to their own rhythm, driven by long-term expectations about inflation, growth, and risk.
While many wait for a “perfect” rate, savvy buyers are making calculated moves — looking to get in on the historic appreciation our area is experiencing.
So, if you’ve been waiting for the right moment, remember:
You can’t control interest rates — but you can choose to get in the game.
