Mortgage rates rose slightly this week as financial markets adjusted after the Federal Reserve cut the benchmark federal funds rate.
The average 30-year mortgage rate was 6.3% through Wednesday, up from 6.26% last week, according to Freddie Mac data. 15-year mortgage rates rose to 5.49% from 5.41%.
The Fed doesn’t directly control mortgage rates, and it’s not unusual for mortgage rates to rise even after benchmark interest rates are cut. A similar dynamic occurred last year, with mortgage rates hitting their lowest level of 2024 just after the central bank dropped the federal funds rate 25 basis points at its September meeting. Mortgage rates then rose steadily despite further Fed cuts later in the year.
“Mortgage markets are forward-looking — pricing in Fed moves ahead of time, similar to the pattern observed in September 2024, when rates initially dropped in anticipation but subsequently rose following the Fed’s actual rate cut,” Kara Ng, senior economist at Zillow Home Loans, said in a statement.
Read more: The Fed finally cut the federal funds rate. Will mortgages get cheaper?
In recent weeks, mortgage rates moved down in anticipation of the Fed’s move. They hit year-to-date lows last week before reversing some of their decline but are still near the lowest levels of the year.
Homeowners have taken notice. Refinancing activity is up 80% from four weeks ago, according to Mortgage Bankers Association data. Refinancing applications were up a more modest 1% week-over-week through Friday, while applications to purchase a home were nearly flat.
Economists think lower mortgage rates might help pull home sales out of their deep slump toward the end of this year, but for now, many potential buyers are still staying on the sidelines.
Existing home sales dropped slightly in August compared to a month earlier, according to National Association of Realtors data released Thursday, and sales so far this year are on track to be at or near a 30-year low.
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.
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