Why can mortgage rates rise even if the Fed cuts rates?

The Fed has been lowering interest rates, so why aren't mortgage rates falling with them? It seems like the two should move together, but they often don't.

The Fed controls a short-term rate. Mortgage rates follow longer-term bond yields, and those can rise even while the Fed cuts.

The Fed's policy rate is the cost of borrowing overnight between banks. It is a short-term lever, and the Fed sets it directly.

A 30-year mortgage is a long-term loan, so lenders price it off long-term rates, especially the 10-year Treasury yield. That yield is set by investors in the bond market, not by the Fed.

What investors demand depends on what they expect for inflation, economic growth, the supply of Treasury bonds, and where the Fed will set rates in the future. If those expectations worsen, long-term yields can rise no matter what the Fed does today.

This week the 10-year Treasury yield climbed to 4.48%, its highest level since early summer, even though the Fed has been easing this year.

Inflation came in firmer than hoped and consumers kept spending, so investors now expect fewer and later rate cuts. Long-term yields rose in response, and mortgage rates, which track them, stayed high.

Waiting for the Fed to cut is not the same as waiting for mortgage rates to fall. Mortgage rates respond to the same forces as the bond market, and they can move either way in any given week.

That is worth remembering when thinking about buying a home, refinancing, or other long-term borrowing. Treasury yields and inflation reports are often better clues than Fed announcements. This is general context, not personal financial advice.