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

Why Fed Day Matters Even Though Mortgage Rates Are Already Lower

The CL Team
The CL Team
May 19, 2025

It's a foregone conclusion that the Fed will be cutting rates on Wednesday, September 18th. As exciting as that might sound, mortgage rates have already reaped the rewards.  

The CL Team zero changes in the Fed Funds Rate during this time, despite mortgage rates dropping nearly 2% chart

If you'd like to understand this with a simple, nuts and bolts example, just consider the numerous occasions where mortgage rates have fallen BEFORE and moved HIGHER AFTER the Fed has cut the Fed Funds Rate.  

The CL Team Fed Rate Cut chart 30yr fixed mortgage rates
The CL Team fed funds rate chart rates went up for 7 months after the Fed's bigger cuts
The CL Team in late 2019 mortgage rates were at 3.74% when the fed began cutting and at 3.78% after 2 more cuts chart

If you'd like to understand WHY that is possible and you missed the last two newsletters, they'll bring you fully up to speed.

Why You Might Regret Waiting For Better Rates After The Fed Cuts

Here's Exactly What a Fed Rate Cut Will Do For Mortgage Rates

And last but not least, for those who want to understand WHY but who don't like clicking links, here's a quick, bullet point recap:

  • Mortgage rates can move every day whereas the Fed only meets once every 6 weeks
  • The Fed communicates what it's likely to do
  • Financial markets allow for bets on probabilities of Fed rate cuts
  • Other bonds (like those that determine mortgage rates) are influenced by those probabilities
  • As such, if the Fed says they're going to cut, and if the market is already betting on rate cuts, then mortgage rates have already moved lower in anticipation.

Despite all of that, Fed Day can still matter for a variety of reasons.  That's especially true of this particular Fed Day because it is one of the most uncertain in terms of the outcome.  

We've talked quite a bit about the Fed cutting rates, but not as much about the SIZE of that rate cut.  This is one of those rarer instances where the market is fairly evenly split between expecting the cut to be 0.25% or 0.50%.  That means about half the market is going to be surprised and when the market is surprised, volatility ensues.  This wasn't necessarily destined to be the case earlier this week, but odds quickly returned to evenly split after a Wall Street Journal article made a case for the Fed having options on Thursday.

The CL Team estimated fed funds rate after september meeting based on fed funds futures chart

If the Fed Funds Rate (the thing that is being cut on Wednesday) were the only part of the announcement, a 0.25% cut would likely cause other interest rates to move higher while a 0.50% would do the opposite.  The counterpoint is that some investors could worry that 0.25% is not a fast enough removal of restrictive financial conditions, thus leading to more bets on recession.  In that scenario, mortgage rates could actually fall despite the smaller rate cut from the Fed.

Conversely, other investors could worry that a 0.50% cut is aggressive enough to reinvigorate inflation or overstimulate the economy, thus putting UPWARD pressure on mortgage rates despite a larger Fed rate cut.

But the rate cut itself is only one part of the announcement.  At the exact same moment that the cut is announced, the Fed releases two other documents.  The first is the policy statement that contains additional verbiage surrounding the rate cut.  The rest of the interest rate world can view that verbiage as friendly, unfriendly, or neutral.  

The other document is a summary of economic projections (SEP).  One key component of the SEP is the chart of each Fed member's projection for the appropriate Fed Funds Rate at various points in the future.  This is represented in a dot plot format and has become so influential that any devout market watcher knows exactly what you mean if you mention "the dots!"

In addition to the two documents released at 2pm ET, Fed Chair Powell holds a press conference at 2:30pm which includes a Q&A portion.

So we have:

  1. The rate cut itself
  2. The verbiage in the statement surrounding the rate cut
  3. The SEP with the dot plot showing the rate cut outlook for future meetings
  4. Fed Chair Powell's press conference

Any of those 4 items could exert upward or downward pressure on longer-term rates.  All we know today is that mortgage rates have already baked in something between a 0.25% and 0.50% Fed rate cut.  

What does all of the above mean? There will be volatility.  It could be quite large when it comes to Wednesday and possibly Thursday.  It has an equal chance of pushing mortgage rates higher vs lower, even though the Fed is certainly cutting its policy rate. Ultimately, the short-term volatility shouldn't have a lasting impact on bigger picture rate trends.  Those will be more heavily influenced by the next big round of economic data in early October.

Share this post
It's a foregone conclusion that the Fed will be cutting rates on Wednesday, September 18th. As exciting as that might sound, mortgage rates have already reaped the rewards.
https://clteam.us/post/why-fed-day-matters-even-though-mortgage-rates-are-already-lower

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