Mortgage rates have nudged upward following the Federal Reserve’s widely anticipated interest-rate cut on Wednesday, a counterintuitive reaction that highlights how complex the relationship between Fed policy and consumer borrowing costs can be.
According to Mortgage News Daily, the average 30-year fixed mortgage rate climbed 15 basis points Thursday to 6.37%—on top of a 9-basis-point jump immediately after the Fed’s decision. The central bank trimmed its benchmark rate by 25 basis points in an effort to cushion a weakening labor market and stubborn inflation, but Fed Chair Jerome Powell stressed there is “no risk-free path” as policymakers navigate an uneven economy.
Although the Fed does not set mortgage rates directly, its decisions on short-term borrowing costs ripple through financial markets and often sway longer-term yields that drive mortgage pricing. In the immediate aftermath of Wednesday’s announcement, 10-year Treasury yields—an important benchmark for mortgage rates—initially dipped but finished the session higher. They rose again on Thursday after fresh government data showed a sharp decline in new unemployment claims, underscoring continued labor-market volatility.
Even with this latest uptick, mortgage rates remain near their lowest levels of 2025. Freddie Mac, which surveys lenders each week, reported a 6.26% average rate for 30-year loans through Wednesday—the lowest since October 2024—though most of that data was collected before the Fed meeting. Rates had been trending lower for several weeks as markets priced in the Fed’s move and new indicators pointed to slowing job growth.
Where rates go from here is far from clear. Powell noted that changes to the Fed’s policy rate “tend to affect” mortgage borrowing costs, but history shows the connection is not always one-to-one. In 2024, for example, mortgage rates actually rose during a stretch when the Fed cut rates three times between September and December. Current projections released Wednesday show Fed officials penciling in two more cuts this year, but their short-term economic outlook remains divided.
Some housing-market analysts believe the scope for further declines in mortgage rates is limited. “With financial markets anticipating a more rapid easing of monetary policy than the Federal Reserve is likely to deliver, mortgage rates aren’t likely to fall much further,” Orphe Divounguy, senior economist at Zillow, said in a statement. Rocket Mortgage executive Bill Banfield echoed that view, saying rates are likely to stay “relatively flat” in the near term because markets have already priced in the Fed’s latest cut.
Still, even modest rate relief appears to be spurring activity. The Mortgage Bankers Association reported a 58% surge in refinancing applications through Friday compared with the previous week, and a 70% increase over the same time a year earlier. Applications for home purchases also rose 3% week-over-week, suggesting that more borrowers are moving to take advantage of recent declines in borrowing costs despite this week’s bump higher.
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