Home buyers view a home with a real estate agent.
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The Federal Reserve cut interest rates for the third time in 2024 on Wednesday. Despite this measure, mortgage rates rose.
The 30-year fixed-rate mortgage rose to 6.72% in the week ended Dec. 19, a day after the Fed meeting, according to Freddie Mac data on the Fed. This is an increase of 6.60% compared to the previous week.
According to Mortgage News Daily, the 30-year fixed-rate mortgage rose to 7.13% at the intraday level on Wednesday, up from 6.92% the previous day. On Thursday it rose to 7.14%.
The Fed “spooked the bond market”
The Fed's so-called dot plot this week showed fewer signs of further rate cuts in 2025, according to Melissa Cohn, regional vice president of William Raveis Mortgage in New York.
The dot chart showing each member's interest rate expectations shows that officials expect their key interest rate to fall to 3.9% by the end of 2025, a target range of 3.75% to 4%. After the recent rate cut, it is currently at 4.25% to 4.50%.
When the Fed made its first rate cut in September, it had forecast four quarter-point cuts and one full percentage point cut in 2025.
“That, coupled with Trump's desired policies on tariffs, immigration and tax cuts – all of which are inflationary – has unsettled the bond market,” Cohn said.
Mortgage rates also tend to move in anticipation of what the Fed will do at its upcoming meetings, said Jacob Channel, a senior economist at LendingTree.
For example, mortgage rates fell this summer and early fall in anticipation of the first rate cut since March 2020.
Therefore, mortgage rates are unlikely to do “anything particularly dramatic” given the actual Fed meeting, he said.
Correction: The Fed's most recent adjustment lowered its key interest rate by 0.25 percentage points. An earlier version stated the move incorrectly.