Aerial view of neighborhood homes in San Francisco, California, August 27, 2025.
Justin Sullivan | Getty Images
Although the Fed lowered its benchmark interest rate this week, mortgage rates responded with exactly the opposite behavior.
The average interest rate on a 30-year fixed mortgage has increased by 20 basis points (bp) since Chairman Jerome Powell held a press conference announcing the rate cut on Wednesday, according to Mortgage News Daily.
This happened the last time the Fed cut rates for a very simple reason: the bond market was already pricing in a rate cut and didn’t like Powell’s comments.
On Tuesday, the average 30-year fixed rate fell to 6.13%, matching the recent low on Sept. 16, the day before the Fed announced its last rate cut, and the lowest level in a year.
And this week, after the Fed announced rate cuts and Chairman Jerome Powell answered questions at a press conference, rates jumped 14 basis points on Wednesday and rose another 6 basis points on Thursday to 6.33%, 20 basis points higher than they were on Tuesday. Last September, the 30-year fixed mortgage rate rose further to 6.37%.
“The market’s enthusiasm for three Fed rate cuts in 2025 has grown a bit too much for the Fed’s liking,” Matthew Graham, chief operating officer at Mortgage News Daily, said in a client note. “The market was almost 100% confident of another rate cut in December. The Fed wasn’t so sure, but Chairman Powell decided to say so yesterday. The result is a gradual resetting of yields back to more consistent levels, making a December rate cut a solid possibility, but not completely locked in.”
According to the Mortgage Bankers Association, the recent drop in interest rates has led to a surge in refinance applications, with refinance applications increasing 111% last week compared to the same month last year. But lower interest rates didn’t make a big difference for potential homebuyers.
