An aerial view of houses in a neighborhood on August 27, 2025 in San Francisco, California.
Justin Sullivan | Getty Images
While the Federal Reserve cut interest rates this week, mortgage rates responded in exactly the opposite way.
According to Mortgage News Daily, the average interest rate on the 30-year fixed mortgage has increased 20 basis points since Chairman Jerome Powell announced the cut and held a news conference on Wednesday.
This also happened the last time the Fed cut its interest rate, and the reason is pretty simple: the bond market had already priced in a rate cut, but it didn't like Powell's comments.
On Tuesday, the average 30-year bond interest rate fell to 6.13%, hitting the recent low set on September 16, the day before the Fed announced its latest rate cut, and marking its lowest level in a year.
Then, this week, after the Fed announced it would cut interest rates and Powell answered questions in a press conference, the rate jumped 14 basis points on Wednesday and rose another 6 basis points to 6.33% on Thursday, even 20 basis points higher than Tuesday. Last time in September, the interest rate on the 30-year fixed mortgage rose even higher, to 6.37%.
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“Market enthusiasm for three Fed rate cuts in 2025 had become a little too much for the Fed’s liking,” said Matthew Graham, chief operating officer at Mortgage News Daily, in a note to clients. “The market was almost 100% certain of another rate cut in December. The Fed wasn't so sure, and Powell expressed that yesterday. The result is a slight pullback in yields to levels more consistent with a December cut, which represents a solid possibility but not a complete lock.”
According to the Mortgage Bankers Association, the recent drop in interest rates had led to a rush for refinances, with applications increasing 111% year-over-year last week. However, lower interest rates didn't have much of an impact on potential homebuyers.