Why the Fed's Rate Cut Doesn't Mean Lower Mortgage Rates (Yet)

When the Federal Reserve (the “Fed”) announced a quarter-point rate cut this week, many expected mortgage rates to fall — but they didn’t. In fact, they rose slightly.

For Michigan homebuyers hoping for relief, that can feel confusing — but there’s a clear reason why.

Here’s the truth: mortgage lenders don’t wait for the Fed’s decision to set their rates. And this week, what Fed Chair Jerome Powell said mattered far more than what the Fed actually did.

Let’s break down what’s really happening — and what it means for your home buying plans in Michigan.

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Powell's Comments Changed Everything

At the October meeting, Fed Chair Jerome Powell told reporters that another rate cut in December is “far from a foregone conclusion.”

That single statement had a bigger impact than the rate cut itself.

Why? Because markets don’t care about what just happened — they care about what happens next.

Investors had been expecting the Fed to keep cutting rates through the end of the year. But Powell’s cautious tone told them to pump the brakes.

The result? Bond yields jumped, and mortgage rates ticked up instead of down — despite the Fed lowering its benchmark rate.

In other words: The Fed cut rates, but Powell’s uncertainty about future cuts pushed mortgage rates higher.

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👉 Confused about how this affects your buying power? Get pre-approved today and we'll walk you through your real options — not just the headlines.

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Why Mortgage Rates Didn't Drop After the Fed's Rate Cut

If the Fed cut rates, shouldn't mortgage rates go down too?

Not necessarily — and here's why.

Mortgage rates are tied to long-term bond yields (especially the 10-year Treasury), not the Fed's short-term rate.

Those bond yields move based on what investors think will happen next — not what already happened.

Bond traders constantly watch for clues in:

• Inflation reports – Is inflation cooling or staying sticky?

• Jobs and wage data – Are people earning more, which could fuel inflation?

• Fed statements and speeches – What’s being signaled about future moves?

• Global market sentiment – Are investors nervous or optimistic?

  
  

When traders believe inflation will stay higher for longer or that the Fed will pause future cuts, bond yields rise — and so do mortgage rates, even if the Fed just lowered its rate.

The bottom line: Mortgage rates react to expectations about the future, not official announcements about the past.

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Mortgage Rates Were Already “Priced In” — Here’s What That Means

Here’s the part that surprises most people: By the time the Fed announces a rate cut, mortgage lenders have already adjusted their rates.

Lenders don’t wait for the official decision. They move weeks in advance based on what’s expected:

• If a cut looks likely, they often lower rates early to stay competitive.

• If inflation or strong economic data shifts expectations, they increase rates to protect margins.

By the time the Fed confirms its move, the market has already reacted.

Think of it like concert tickets. When Taylor Swift announces a Detroit show, prices surge that day — not the night she performs.

Markets behave the same way: they react to what’s coming, not what’s already happened.

That’s why this week’s rate cut didn’t cause mortgage rates to drop — the drop already happened earlier this month when markets first anticipated it.

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What This Means for Michigan Homebuyers

Don’t let headlines about “Fed cuts” trick you into waiting for lower mortgage rates that may not come overnight.

Here’s the good news:

• Rates can still improve if inflation cools or December brings clarity.

• Local lenders can help you act now with creative programs that soften today’s rate environment — like down payment assistance, temporary buydowns, or refi options built for flexibility.

• Waiting isn’t always the best strategy — especially in Michigan’s competitive markets like Grand Rapids, Detroit, Kalamazoo, and Ann Arbor, where inventory is tight and great homes move fast.

At Mortgage Up, we help Michigan buyers make confident decisions — whether the market’s rising, falling, or holding steady.

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Frequently Asked Questions

Will mortgage rates drop if the Fed keeps cutting rates?

Maybe — but not automatically. Mortgage rates follow long-term bond yields, which are influenced by inflation expectations, economic data, and global markets. If inflation stays high or the economy remains strong, mortgage rates may stay elevated even with Fed cuts.

Should I wait to buy a home until rates drop?

Waiting has risks. Home prices in Michigan continue to rise in many markets, and inventory is limited. If rates drop but home prices increase, you may not save money overall. Plus, you can always refinance later if rates improve.

How do I know if now is a good time to buy?

It depends on your personal situation — your savings, income stability, and long-term goals. A local lender can help you run the numbers and decide if buying now (or waiting) makes sense for you.

What’s the difference between the Fed rate and mortgage rates?

The Fed sets short-term interest rates that affect things like credit cards and car loans. Mortgage rates, on the other hand, are tied to long-term bonds (like the 10-year Treasury). They don’t move in lockstep.

Can I still get a good deal on a mortgage in Michigan right now?

Absolutely. Many Michigan buyers are using creative financing options like down payment assistance, FHA loans, temporary buydowns, and local programs to make homeownership affordable — even when rates aren’t at historic lows.

Need help finding the right program? Reach out to us — we specialize in making Michigan homeownership possible.