Fed Cut Rates—So Why Didn’t Mortgage Rates Drop?
You may have seen the headlines: the Fed cut its benchmark rate by 0.25% and ended quantitative tightening.
Neither move surprised the markets—and neither triggered a big drop in mortgage rates.
Here’s why mortgage rates didn’t follow suit—and what’s really moving them now:
Why Mortgage Rates Didn’t Drop
- The Fed funds rate ≠ mortgage rate : The Fed’s move affects short-term rates (like credit cards and home equity lines), not long-term borrowing costs. Mortgage rates are tied more closely to the 10-year U.S. Treasury yield and how investors view inflation, risk, and the economy.
- Markets were already expecting this cut: A 0.25% cut was already priced in—and many investors were hoping for 0.50%. When the Fed didn’t go that far (and Chair Powell signaled future cuts aren’t guaranteed), long-term Treasury yields rose. Mortgage-backed securities lost ground, and mortgage rates followed suit.
- It’s not just the cut—it’s the commentary: The market reacts less to what the Fed does and more to what it says about the future. Today’s tone sent a signal that future cuts may not come as quickly as expected—and rates adjusted accordingly.
What’s Moving Mortgage Rates Now
- Inflation & expectations: Persistent (“sticky”) inflation keeps long-term yields—and mortgage rates—elevated.
- 10-year Treasury yield: The key benchmark for mortgage pricing. When yields rise, rates tend to follow.
- Economic data: Strong job and wage growth can keep rates higher; softer data can help ease them..
- Fiscal pressures & global demand: Large government deficits and fluctuating global demand for U.S. bonds keep longer-term yields high—likely keeping mortgage rates in the 6%+ range for now.
What This Means for You
Just because the Fed cut rates doesn’t mean your mortgage rate will automatically drop.
If you find a monthly payment that fits your life, this may be a good time to act—especially with our free float-down option, which lets you benefit if rates improve later.
Here are a few questions to guide your decision:
- What’s my time horizon? (5 years, 10 years, forever?)
- What monthly payment fits my budget—not just the “lowest rate”?
- Do I have a plan to lock when conditions make sense for me, not the headlines?
- If I lock now, do I still have flexibility if rates move lower? (Yes—with a float-down or recast.)
Bottom Line
Yes—the Fed cut rates. But mortgage rates didn’t tumble.
That’s because they’re driven by long-term yields, inflation expectations, and investor behavior, not short-term policy changes.
Understanding this helps you act with clarity—not react to headlines.
If you’d like to review your own scenario—compare your current loan, discuss refinance options, refine your lock strategy, or time your next move—let’s talk.
Together, we can create a plan that fits your goals, not just market noise.
The BankSouth Mortgage Advantage
Experience the speed of ReadyApprove from BankSouth Mortgage, where you can secure conditional approval for conforming loan limits within hours.
With ReadyLoan®, you can make this process even easier. Our digital platform lets you apply, track your loan progress, and submit documents securely—all from your computer or mobile device. You’ll be armed with the confidence to quickly submit an offer, and the seller will see you as a serious, prepared buyer.
Have peace of mind with our FREE one-time rate float-down** and no lender fee refinance options!
When you purchase your home with me at BankSouth Mortgage, you may be able to refinance later with no lender fees.*** This program offers flexibility as life changes, with the potential for savings when it matters most.
Market data sourced from Mortgage News Daily and MBS Live. *Annual escrow statements may be provided at different times of the year. Please check with your mortgage servicer for details. **One-time float down available on 45-120 day rate locks. Float down must be executed at least 15 days prior to closing and must be at least .125 improvement. ** This offer may change or end at any time without notice. “No Lender Fees” refers to waived origination charges. Eligibility conditions apply. Subject to credit and property approval.
Blog post date: Thursday, October 30, 2025
