Mortgage rates tick up following Fed move, though they’re still near 2025 lows

Mortgage rates are creeping higher after the Federal Reserve cut benchmark interest rates on Wednesday, a counterintuitive but common phenomenon.

The average 30-year fixed mortgage rate rose 9 basis points on Wednesday to 6.22%, according to Mortgage News Daily, and Treasury yields, which closely track mortgage rates, are moving higher Thursday.

Mortgage rates ticked up after the central bank delivered its widely expected 25 basis-point cut, but Fed Chairman Jerome Powell cautioned that “there is no risk-free path” as the Fed tries to navigate a weakening labor market and relatively hot inflation.

The Fed doesn’t directly control mortgage rates, though its interest rate decisions can influence them.

10-year Treasury yields initially fell on Wednesday after the cut but ended the day higher. They rose again on Thursday after new data showed a sharp drop in unemployment claims last week.

Before the recent uptick, mortgage rates had been moving steadily downward for several weeks as financial markets anticipated the Fed’s cut and new data showed that hiring was losing steam.

Freddie Mac, which surveys lenders weekly, pegged mortgage rates at 6.26%, the lowest level since early October 2024, through Wednesday. Much of Freddie Mac’s data was collected before the Fed’s cut.

“We don’t set mortgage rates, but our policy rate changes do tend to affect them,” Powell said on Wednesday. “That has been happening. That will, of course, raise demand.”

Where mortgage rates go next is anyone’s guess. Last year, the Fed cut rates three times between September and December, but mortgage rates rose throughout that period. Data released on Wednesday shows that Fed officials are penciling in two more rate cuts this year, but remain divided over their short-term economic outlook.

“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.

Similarly, Rocket Chief Business Officer Bill Banfield said in a statement that mortgage rates were likely to be “relatively flat” in the short-term because financial markets had already priced in the latest cut.

There are signs that more borrowers are taking notice of the recent downward moves in mortgage rates. Refinancing demand surged 58% through Friday compared to a week earlier and is up 70% from this time a year ago, according to Mortgage Bankers Association data. Mortgage applications for home purchases also rose 3% week-over-week.

While mortgage demand is showing signs of improvement now, home sales have been slow for much of the year as buyers struggle to afford near-record high home prices and mortgage rates north of 6%. Lower rates alone might not be enough to boost the market, Powell said.

“I think most analysts think it has to be big changes to matter a lot for the housing sector,” he said on Wednesday.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.