Well, it’s Fed Day again. That means we get another decision from the Federal Reserve today.
At last glance, the odds of another 25 basis point cut are a whopping 97.8%, according to the latest numbers from CME FedWatch.
In other words, the Fed will announce a 25 bp cut in a few hours. No one will be surprised.
And chances are, if the last several Fed meetings have been any indication, mortgage interest rates will rise.
Why? Because they tend to defy the Fed, at least during the day. Allow me to explain.
The Fed telegraphs its moves and mortgage rates react long before the actual meeting
The easiest explanation for why the Fed does one thing and mortgage rates do another comes down to the transparent nature of the Fed.
They don’t keep us all on pins and needles wondering what they’re going to do. We’re not all holding our collective breath here.
On the contrary. We basically know what the Fed will do today. In fact, we’ve essentially known for a month, if not longer, what they’re going to do today.
As such, the move is baked in. It is already factored into the 30-year fixed mortgage rate that you see advertised.
Granted, the Fed does not set mortgage rates, nor does it necessarily have as much influence as many think.
But the Fed’s interest rate expectations may play a hand in the matter. Of course, the Fed only makes interest rate decisions based on the underlying economic data.
So it’s really economic data that determines mortgage rates, not the Fed or anyone else.
The only thing the Fed affects directly are HELOC rates, which are tied to the prime rate, which moves in lockstep with the fed funds rate.
Long story short, the 30-year yield will not drop by 0.25% today, that is a fact.
But HELOCs are getting 0.25% cheaper!
Interest rates on mortgages may rise today
We know mortgage rates won’t go down because the Fed is cutting today.
They certainly don’t fall by 25 basis points. So no, your 6.125% rate will not drop to 5.875% today. Or anywhere nearby.
If you are considering changing your mortgage rate, be careful.
In fact, mortgage rates may well rise today after the long-awaited FOMC statement is released.
But not because of the Fed’s rate cut. Because the market might just be breathing. It can undo some of the downward movement leading into the incision.
Remember that mortgage interest rates are currently close to 3-year lows. When they are at the low end of a range, the odds of a pullback are higher.
Like stocks at highs, a reversal is a real possibility.
Mortgage lenders and MBS investors might want to pump the brakes and say this is as good as it gets for now.
However, that will be determined to some extent by what the Fed says today.
Barring the 25bp cut, which is a sure thing, we’ll hear from Fed Chair Jerome Powell again.
That will be what moves mortgage rates today, assuming they move at all.
I would err on the side of caution here as he probably will too.
He is likely to say they are still cutting carefully, and with no new data due to the government shutdown, their approach will remain conservative.
Mortgage rates may not like it, or don’t care at all, but chances are, given recent history, they will move in the opposite direction of the Fed.
But any such movement is likely to be fairly minimal and likely short-lived in the grand scheme of things.
Interest on mortgage credit vs. Fed interest rate decisions
October 29, 2025: Interest rate cut, mortgage rates up (and end of QT)
17 September 2025: Interest rate cut, mortgage rates up
18 December 2024: Interest rate cut, mortgage interest rates up
7 November 2024: Interest rate cut, interest on mortgage loans DOWN
18 September 2024: Interest rate cut, mortgage rates up
26 July 2023: Interest rate increase, mortgage rates down
3 May 2023: Interest rate increase, mortgage interest rates down
March 22, 2023: Interest rate increase, mortgage rates down
1 February 2023: Interest rate increase, mortgage interest rates down
14 December 2022: Interest rate increase, mortgage rates down
2 November 2022: Interest rate increase, mortgage interest UP
21 September 2022: Interest rate increase, mortgage rates down
27 July 2022: Interest rate increase, mortgage rates down
15 June 2022: Interest rate increase, mortgage rates down
4 May 2022: Interest rate increase, mortgage interest rates down
16 March 2022: Interest rate increase, mortgage interest UP
