Mortgage rates jumped to a six-week high of 6.72% for the week ending Dec. 19, according to Freddie Mac data via the Federal Reserve.
The rate increase followed the Fed’s decision to cut interest rates for the third time in 2024 on Wednesday. Despite the move, borrowing costs continued to rise.
According to Jessica Lautz, deputy chief economist at the National Association of Realtors, the market is responding to the tone of the Fed’s message. The central bank has lowered its benchmark rate by 0.25 basis points, but mortgage rates are largely driven by Treasury yields and bond market reactions.
The Fed’s dot plot, which indicates individual members’ expectations for future interest rates, showed a more cautious outlook for 2025. Officials now see the benchmark lending rate falling to 3.9% by year-end, compared to an initial projection of four quarter-point cuts.
Experts attribute the jump in mortgage rates to the Fed’s “spooked” bond market, which reacted to President Trump’s policies on tariffs, immigration, and tax cuts. Mortgage rates tend to anticipate the Fed’s actions, with rates declining earlier this year as anticipation of rate cuts grew.
As a result, experts expect mortgage rates to remain steady despite the Fed’s rate cut, at least in the short term.
Source: https://www.cnbc.com/2024/12/20/why-mortgage-rates-jumped-despite-fed-interest-rate-cut.html