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The Federal Reserve recently cut interest rates to their lowest level in three years, but the real estate world isn’t celebrating just yet. While the move might sound like a win for borrowers, mortgage rates have actually gone up since the announcement, confusing many hopeful homebuyers and investors alike.
On the day before the Fed’s latest rate cut on Oct. 29, 30-year mortgage rates dipped to 6.37%, their lowest in over a year. But the day after the announcement, they had climbed to 6.49% and have held steady since. That increase came even after the Fed lowered its benchmark rate by 0.25%.
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This disconnect is a reminder that the Fed’s rate doesn’t directly control mortgage rates. Instead, mortgage costs are more heavily influenced by the 10-year Treasury yield, inflation expectations, and overall economic conditions.
On Reddit’s r/realestateinvesting community, opinions varied widely. Some dismissed the cut entirely. “Wrong rate cut,” one said, while another pointed out, “Mortgage rates just went up 20 bp after the latest Fed rate cut.”
“People continue to confuse Fed rates with mortgage rates,” a commenter wrote. “Mortgage rates went UP yesterday after the cut. While they can be semi-correlated, they do not move exactly together.”
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Others took a longer view. One investor predicted, “Borrowing will increase, the real estate market will stabilize or rise slightly, and investors will start taking risks again.” But another warned, “Younger people can’t afford the inflated COVID prices boomers will sell their house for. Increased supply will be sitting there and will be lowered after a month or two.”
There were also regional takes. A commenter from Georgia noted seeing constant price cuts: “$5k-$25k cuts to prices every other week.” Meanwhile, in Washington state, another said, “Prices are increasing, no one is dropping prices.”
Some commenters linked the rate cut to broader economic fears. “Lowering rates should raise concern for the economy’s general health,” one said. Others described the current moment as “stagflation,” where inflation stays high while growth slows.