The Federal Reserve on Wednesday cut its benchmark interest rates by 25 basis points, which led experts to believe mortgage rates would fall. However, a new survey showed mortgage rates only trekked higher.
In the prior week, the average contract rate for the 30-year fixed-term mortgage was 6.60%, while the rate for the 15-year term was 5.84%. Following the Fed's 0.25% cut, the rates for both mortgage terms climbed higher.
Now, the average rate for the 30-year term was 6.72% while the rate for the 15-year term was 5.92% - marking a 0.12% and 0.08% increase, respectively, according to data from Freddie Mac.
The rates are now nearly as high as the average around this time last year.
Why Did Mortgage Rates Climb Up?
It is important to note that Freddie Mac's Primary Mortgage Market Survey was conducted before the Fed cut its rates. However, the Fed did hint that it may only lower its benchmark rates twice in 2025. These dimmer prospects led to higher Treasury yields and mortgage rates, per Yahoo Finance.
Additionally, experts point to the country's strong economic indicators and the re-election of Donald Trump. Experts specifically believe Trump's proposed economic policies could lead to a higher deficit and greater inflation, which led to the increase in mortgage rates, CNET reported, citing Rueth Team Powered by Movement SVP Nicole Rueth.
It is important to note that it is not the first time mortgage rates went up following a Fed cut. In September, the Fed made its first cut this year, lowering its benchmark rate by half a percentage point. The 30-year mortgage rate at the time was 6.09%
Three months later, mortgage rates have increased to the current 6.72%.
What Will Mortgage Rates Look Like in 2025?
A forecast from Bright MLS said it expects mortgage rates to hover above 6% throughout 2025 before settling at 6.25% by the end of next year. This could, however, fall to the 5% range should inflation trend lower and the US labor market weaken.
