Meet the TeamBlogReviewsMortgage CalculatorsFirst-Time HomebuyersContact Us
Link Four
Link FiveLink SixLink Seven
Apply Now
Tips

Fed Will Cut Next Week, But They're Not Cutting Mortgage Rates

The CL Team
The CL Team
May 19, 2025

Mortgage rates spent 5 out of 5 days moving higher this week.  Frustratingly, the damage wasn't readily linked to normal motivations like stronger economic data or higher inflation. It served as a reminder that rates can move for reasons that transcend easy explanations.

One of the easiest and most blatantly incorrect explanations for mortgage rate movement is that it has something to do with Fed rate cuts/hikes.  The Fed Funds rate and mortgage rates only reliably move in the same direction over very long time horizons.  Over practical time frames for most mortgage borrowers, however, it can be very dangerous to expect such a correlation.

Back in September, we spent several weeks warning about the possibility that mortgage rates could rise even as people were waiting for the Fed to cut. This time around, the set-up is a bit different, but caveats remain.  

To reiterate: the Fed does NOT set mortgage rates and the Fed Funds Rate does not necessarily move in the same direction as mortgage rates over short periods of time.  

In fact, because the Fed only meets 8 times a year, the Fed's rate is typically perfectly flat for 6 weeks in a row.  All the while, mortgage rates are free to experience as much volatility as they like.

To understand this, simply consider that rates are based on loans (debt/borrowing/lending on all scales) and there are many different variables that can impact loans.  The simplest is the length of time in which a certain loan must be repaid.  For most mortgages, it's up to 30 years with the average mortgage lasting between 5 and 10 years.

For the loans based on the Fed Funds Rate, it's less than 24 hours.

Simply put, investors have different ideas about what the rate should be for multi-year lending versus overnight lending.

Now, forget the "why" and let's just look at how this has played out in the past year.  The following chart shows the Fed Funds Rate (the thing the Fed is about to cut again) in blue and average mortgage rates in orange.

The CL Team Mortgage Rates Fed Funds Rate Chart

To reiterate, mortgage rates dropped by nearly 2% without any help from the Fed Funds Rate!  More importantly, it was literally the same day of the September rate cut that mortgage rates began moving HIGHER from their long term lows.

To be clear, this is not a prediction about the upcoming week.  It's just a reminder that there are no guarantees about mortgage rates.  The market already knows the Fed will cut.  If anything on Fed day ends up having an impact on mortgage rates, it would have to be changes in the Fed's rate outlook and/or comments from Fed Chair Powell during the press conference that follows the rate announcement.

Share this post
Mortgage rates rose all week, showing how unpredictable they can be. Learn why Fed rate changes don’t directly control mortgage rates and what really influences these fluctuations.
https://clteam.us/post/fed-will-cut-next-week-but-theyre-not-cutting-mortgage-rates

Discover more articles.

Stay informed with more of our informative blog posts.

Spring Surge: Why Homebuyers Are Still Making Moves Even with High Rates

Spring Surge: Why Homebuyers Are Still Making Moves Even with High Rates

Buyers aren’t waiting for rates to drop—they’re making moves this spring. See why demand is rising, what’s impacting affordability, and how The CL Team is helping clients win in today’s market.
Read more
Some Uncertainty at The End of an Otherwise Decent Week

Some Uncertainty at The End of an Otherwise Decent Week

Markets wobbled to close an otherwise stable week. While weak retail data helped rates early on, a late-day credit downgrade and inflation concerns added fresh uncertainty heading into next week.
Read more
Why Buyers Are More Likely To Get Concessions Right Now

Why Buyers Are More Likely To Get Concessions Right Now

Buyers are gaining ground. With more inventory, builders and sellers are offering incentives like rate buy-downs, price cuts, and paid closing costs to help sweeten the deal.
Read more
View All
This is a Loan Production Office of Luminate Bank®
400 Executive Center Dr., Suite #108, Greenville, SC 29615

(864) 569-0741
origination@clteam.us

Hours: Monday to Friday 9am to 5pm
Our Company
HomeMeet The TeamReviewsContact Us
Resources
CL Team BlogFirst-Time HomebuyersMortgage CalculatorsApply Now
Social Media
LinkedIn
Facebook
Instagram

Caleb LeGrand NMLS 259691

Luminate Bank NMLS 1281698 Bank Headquarters 2523 S. Wayzata Blvd., Suite 100 Minneapolis, MN 55405 (952) 939-7200. This is not an offer to enter into an agreement. Information provided is outlining the minimum down payment requirements as allowed by specific loan program and product guidelines and any information, rates and programs are subject to change without prior notice and may not be available in all states. All loans are subject to credit and property approval. Luminate Bank is not affiliated with any government agency. All rights reserved. Member FDIC. Equal Housing Opportunity Lender.

Copyright © 2023-2022 CL Team at Luminate Bank. Made by Semmodo
Privacy PolicyCompany LicensesNMLS Consumer AccessAccessibility