Mortgage rates rose over 70 basis points in late 2024 following the Fed’s initial cuts before volatile dips
The 10-year Treasury yield influences mortgage rates more than the federal funds rate
Historical data shows Fed cuts lead to higher long-term yields 51% of the time
Current cycle breaks a 40+ year trend of falling yields after rate cuts
When the Federal Reserve cut by 50 basis points in September 2024, many potential homebuyers expected relief. Instead, jumped from 6.09% to 6.84% by November 2024, defying conventional wisdom about monetary policy transmission. While rates have since dipped to around 6.3% amid ongoing cuts, they remain stubbornly high, showing the disconnect is very real.
This counterintuitive relationship between Fed policy and costs is not an anomaly. It is a recurring pattern that highlights the complex mechanics of how interest rates actually work in practice.
The Treasury Connection: Why Mortgage Rates March to a Different Beat
The fundamental disconnect comes down to a simple fact: mortgage rates do not follow the federal funds rate. Instead, they track the 10-year treasury yield, which reflects long-term economic expectations rather than short-term policy changes.
Fed Rate Cuts Don’t Always Mean Lower Mortgage Rates
