Mortgage rates have climbed for the second straight week, despite the Federal Reserve delivering its first interest rate cut in nearly a year, underscoring that a range of factors influence borrowing costs.
Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed mortgage rose to 6.34%, up from 6.3% last week. A year ago, the rate averaged 6.12%, according to its latest Primary Mortgage Market Survey.
MORTGAGE RATES CLIMB FOR SECOND STRAIGHT WEEK
When lenders set mortgage rates, they look to broader market forces. These include the 10-year Treasury yield as well as the price of mortgage-backed securities (MBS), according to Bankrate.
“Mortgage rates closely track 10-year Treasury yields, which shift in real time with new economic data and market expectations,” Realtor.com’s Senior Economic Research Analyst Hannah Jones told FOX Business in an email.
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Mortgage rates are also shaped by the economy, inflation, government policies and global events. A borrower’s credit score, down payment size, debt-to-income ratio, property type and loan choices help determine their specific rate, according to Bankrate.
On Sept. 17, the Federal Open Market Committee cut the federal funds rate by 25 basis points, marking its first reduction since December 2024. Along with the move, Fed Chair Jerome Powell emphasized that future decisions would remain data-dependent, stopping short of pledging a steady pace of cuts, Jones said.
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“Investors had been hoping for stronger guidance on additional cuts in 2025, and the gap between those expectations and the Fed’s cautious messaging pushed the 10-year Treasury yield, and with it, mortgage rates, higher,” Jones told FOX Business.
Before the Fed’s announcement, markets assumed a rate cut was coming, so Treasury yields dropped, and mortgage rates dipped briefly, she noted.
“Yields fell ahead of the Fed’s announcement as markets priced in the cut, bringing mortgage rates down temporarily,” Jones said. “But because the Fed stopped short of signaling a clear path toward further easing, investors recalibrated their outlook, sending 10-year yields, and mortgage rates, back up.”
Rates are expected to stay in a tight range as markets weigh the implications of the government shutdown, Realtor.com senior economist Jiayi Xu said.
“The timing of this disruption is particularly sensitive, coming just after the Federal Reserve cut policy rates for the first time in nine months,” she said.
FOX Business’ Matthew Kazin contributed to this report.
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