Mortgage Rates Didn’t Drop Despite Fed Rate Cut—How Much Higher Are They?

You might have heard that the Fed cut its main interest rate, and logically, you’d think that means borrowing money, like for a house, should get cheaper, right? Well, the immediate numbers show something a bit surprising: mortgage rates have actually crept up a tiny bit since that cut. It’s a head-scratcher for sure, and I’ve been following this closely. My aim here is to cut through the noise and give you a clear picture of what’s really going on with the mortgage rates since the recent rate cut by the Federal Reserve.

Mortgage Rates Didn't Drop Despite Fed Rate Cut—How Much Higher Are They?

The most recent Federal Reserve rate cut happened on September 17, 2025, and it lowered its key interest rate by a quarter of a percentage point, bringing it to a range of 4.00%-4.25%. While this was expected to signal good news for borrowing costs, mortgage rates, particularly the 30-year fixed kind that most people go for, have nudged upward from around 6.26% right after the cut to about 6.30% a week later. This small increase, around 0.04 to 0.11 percentage points depending on how you measure it, might seem minor but it adds to the ongoing conversation about home affordability.

From my perspective, having watched these markets for a while, this slight uptick isn't all that shocking, though it might feel that way. Markets are often like psychic prophets; they price in what they expect to happen before it actually does. So, as people anticipated the Fed cut, mortgage rates had already been dipping. Once the cut was announced, the “buy the rumor, sell the news” effect kicked in, and rates started to re-adjust. Plus, there are bigger economic forces at play that the Fed's moves only partially influence.

Let’s dive into the details.

Understanding the Fed's Role in Mortgage Rates

First off, it’s crucial to understand that the Federal Reserve doesn’t directly set mortgage rates. Think of the Fed’s rate cut as a ripple in a pond. It affects the water nearby, but the main currents and waves are determined by other things. Mortgage rates are more closely tied to what folks call long-term bond yields, especially the yields on the 10-year U.S. Treasury note. When investors are confident about the economy, they tend to demand higher returns on their bonds, which pushes those yields and, consequently, mortgage rates up. If they're worried about the future, yields (and mortgage rates) tend to fall.

The Fed’s job is to manage the economy overall by influencing short-term borrowing. Their decisions send signals about their outlook on inflation and jobs. The cut in September 2025 was a nod to a cooling job market, aiming to give it a little boost without sending inflation spiraling back up. But because markets are forward-looking, they often move before the Fed officially acts.

The Fed's Actions in 2025: A Closer Look

The Federal Reserve holds scheduled meetings throughout the year to discuss and decide on monetary policy. In 2025, they’ve had several meetings. The key one we're discussing is September 16-17, where they reduced the federal funds rate by 0.25 percentage points.

This wasn't the first time the Fed had eased monetary policy in 2025. They had already enacted cuts in late 2024, totaling 1.00 percentage point, as they navigated the post-pandemic economic landscape. The September 2025 cut signaled a continued, but cautious, approach. Fed officials, based on their projections, indicated they anticipated a couple more cuts for the rest of 2025 and one in 2026. This measured approach reflects their balancing act: supporting employment numbers, which had seen slower growth, while keeping an eye on inflation that was still a bit higher than their desired 2% target.

Why Mortgage Rates Are Tricky: The Market's Influence

So, why the counterintuitive rise in mortgage rates right after a cut? It boils down to a few key reasons:

• Anticipation Pricing: As mentioned, markets try to get ahead of the curve. From May through September 2025, mortgage rates had already dropped significantly, anticipating the Fed's move. We saw rates fall from highs around 6.89% in early May down to 6.26% by mid-September. Once the cut officially happened, there wasn't much room left for rates to continue their downward trajectory. In fact, some investors who had bet on rates falling decided it was time to cash out, buying bonds which pushed yields up. It’s like seeing a sale sign, buying up the discounted item, and then seeing the price go back to normal – but in reverse, the rates were already low and then ticked back up slightly after the “sale” was officially announced.
• 10-Year Treasury Yields: The 10-year Treasury note is a huge influencer of mortgage rates. After the Fed’s cut, the yield on this bond actually increased, climbing from below 4% to around 4.15%. Why? Because economic data released around the same time, specifically some reports suggesting inflation might be picking up again (even slightly), made investors a bit nervous. Higher expected inflation generally means higher bond yields.
• The Fed's Careful Talk: The language the Fed uses in their statements and projections is critical. While they cut rates, their commentary signaled caution. They emphasized that future cuts would depend heavily on incoming economic data. The fact that their projections suggested fewer rate cuts than some might have hoped for also played a role in keeping longer-term rates, like those for mortgages, from dropping further.
• Other Economic Factors: Don't forget about the bigger picture. Even with the Fed’s action, persistent issues like the ongoing shortage of homes available for sale continue to keep housing prices high. Lenders consider these factors, and overall economic strength and inflation outlooks still weigh heavily on their decisions about mortgage rates.

Tracking the Numbers: How Much Have Rates Really Changed?

Let’s anchor this in some data. According to Freddie Mac's Primary Mortgage Market Survey (PMMS), which is a go-to source for mortgage rate information:

• On September 18, 2025 (the day after the Fed cut), the average 30-year fixed-rate mortgage stood at 6.26%.
• By September 25, 2025, just a week later, that average ticked up to 6.30%.

This is a modest increase of 0.04 percentage points.

However, other sources track daily rates and might show a slightly different picture, reflecting the rapid shifts in the market. For instance, Mortgage News Daily reported a daily rate of 6.37% towards the end of September. This suggests an even larger increase of about 0.11 percentage points from the immediate post-cut rate.

Let's look at this in a table for clarity:

Table 1: Tracking the 30-Year Fixed Mortgage Rate Around the Fed Cut

Date	Rate (%)	Change from Previous Week	Source
Sep 4, 2025	6.50%	N/A	Freddie Mac
Sep 11, 2025	6.35%	-0.15%	Freddie Mac
Sep 18, 2025	6.26% (Post-Cut)	-0.09%	Freddie Mac
Sep 25, 2025	6.30%	+0.04%	Freddie Mac
Sep 30, 2025	6.37%*	(Varies based on daily avg)	Mort. News Daily

(Note: The 6.37% is a daily average and might reflect slightly different timing than Freddie Mac's weekly survey.)

This demonstrates a clear, albeit small, upward movement in mortgage rates in the immediate aftermath of the Fed's rate cut.

Table 2: Other Mortgage Types

Mortgage Type	Average Rate (%)	General Trend Since Cut
15-Year Fixed	~5.66%	Modest increase
5/1 ARM	~5.80%	Slight increase
FHA 30-Year Fixed	~6.10%	Modest increase

While the 30-year fixed rate is the most commonly discussed, these other popular mortgage types also saw similar, slight nudges upwards.

Real-World Impact: What Does This Mean for You?

Even a small increase in mortgage rates can add up, especially when borrowing large sums for a home. Let's say you're looking at a $300,000 mortgage.

• A rate of 6.26% (right after the cut) on a 30-year fixed loan would mean a principal and interest payment of roughly $1,735 per month.
• A rate of 6.30% (a week later) would bring that payment up to about $1,750 per month.

That's an increase of about $15 per month. While this might not seem like a huge amount for a single month, over the life of a 30-year loan, it adds up to several thousand dollars extra in interest. However, it’s also important to remember that this small bump comes after a period of significant rate declines. So, while rates rose post-cut, they are still considerably lower than they were just a few months prior.

Despite this, the broader challenge of housing affordability persists. Home prices have been climbing for a long time, and even with slightly lower rates than in previous months, the sheer cost of buying a home remains a major barrier for many potential buyers. Some experts are concerned that these persistently high rates, even with the Fed's actions, continue to keep people on the sidelines.

On the flip side, the housing market hasn't completely stalled. According to Freddie Mac, purchase applications for mortgages saw an 18% increase year-over-year in the period following the cut, showing that there's still demand. This suggests that while rates might be a bit higher than expected immediately after the Fed's move, they haven't completely deterred buyers.

Looking Ahead: What’s Next for Mortgage Rates?

The Federal Reserve's actions are just one piece of a very complex economic puzzle. What happens next with mortgage rates will depend on several factors:

• Continued Economic Data: How does inflation behave in the coming months? What do the employment reports show? These will be the Fed's primary guides for future rate decisions. If inflation cools and the job market weakens further, we could see more Fed rate cuts, which would likely pull mortgage rates down again.
• Long-Term Bond Market: Yields on the 10-year Treasury remain a critical indicator. If economic optimism grows and inflation fears resurface, these yields could push mortgage rates higher. Conversely, signs of economic slowing would likely push them lower.
• Market Expectations: The market will constantly try to predict the Fed's next move. If expectations shift towards more aggressive rate cuts, mortgage rates could fall in anticipation.
• Housing Market Supply: The persistent shortage of homes for sale is a structural issue that continues to influence prices and, indirectly, mortgage rates.

For the immediate future, markets are already looking towards the Fed's next meeting in late October (October 28-29). Many analysts, like those at Investopedia, are anticipating another quarter-point cut from the Fed. This could potentially lead mortgage rates to stabilize in the 6.25%-6.50% range in the short term, with a slight downward bias if economic data provides a softer picture.

However, it's important to be realistic. While rates might eventually dip as the Fed continues its easing cycle, they are unlikely to drop back to the ultra-low levels seen in recent years anytime soon. The Fed's focus on inflation means they'll be cautious about cutting rates too quickly. Some forecasts suggest the federal funds rate might end 2025 around 3.50%-3.75%, but mortgage rates often lag and may stay above 6% into 2026.

My Takeaway

In my experience, predicting mortgage rates with certainty is a fool's errand. The Fed's September 2025 rate cut has indeed been followed by a modest increase in mortgage rates, moving from around 6.26% to roughly 6.30%-6.37%. This isn't a sign that the Fed's action was wrong, but rather a demonstration of how complex and forward-looking financial markets are.

• Rates had already fallen in anticipation of the cut.
• Concerns about future inflation caused underlying bond yields to tick up.
• The Fed's cautious forward guidance tempered expectations for rapid rate decreases.

For anyone looking to buy a home or refinance, this means staying informed and being prepared for continued volatility. While a slight uptick might be frustrating, the overall trend towards lower rates is likely to continue as the Fed implements its easing strategy. The key is to shop around, lock in a rate when it feels right for your personal financial situation, and remember that even small rate differences can have a significant impact over time.