Why mortgage rates are going up despite the Fed's interest rate cut
The Claman Countdown panelists Jeff Sica and Dutch Masters predict Fed Chair Powells next moves.
Americans saw mortgage rates soar during the Federal Reserve's aggressive campaign to fight inflation, leading many to hope for a reprieve after the central bank finally cut the federal funds rate last month for the first time in four years.
But instead of declining, mortgage rates have marched higher for the past three weeks, with the benchmark 30-year fixed surging to 6.44% as of Freddie Mac's latest reading.
Mortgage rates spiked in 2022 and 2023 as the Fed hiked interest rates. In the span of just 16 months, the central bank approved 11 rate increases – the fastest pace of tightening since the 1980s.
While the federal funds rate is not what consumers pay directly, it affects borrowing costs for home equity lines of credit, auto loans and credit cards.
AMERICAN CONSUMERS SEE DEBT DELINQUENCY RISK RISING, HIGHER LONG-TERM INFLATION: NY FED
«Fixed mortgage rates move in relation to long-term interest rates like the yield on 10-year Treasury notes, both of which respond to the outlook for economic growth and inflation over the coming years,» Bankrate's chief financial analyst, Greg McBride, told FOX Business. «Mortgage rates tend to move well in advance of any action the Federal Reserve takes with short-term interest rates, not in response.»
A sign is posted in front of a home for sale on Aug. 7, 2024, in San Rafael, California. Mortgage rates have climbed for three straight weeks. (Justin Sullivan/Getty Images / Getty Images)
McBride noted that mortgage rates dropped a full percentage point between May and September from 7.2% to 6.2%, in expectation of coming Fed interest rate cuts.
«The Fed’s more aggressive
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