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Why Mortgage Rates Are Rising After the Fed Rate Cut?

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Contrary to popular belief, mortgage rates don't always drop after a Fed rate cut. Recently, rates jumped by 0.25% following a stronger-than-expected jobs report, which negatively impacted mortgage bonds. This highlights the complex relationship between the Federal Reserve's actions and mortgage rates.


While media often suggests that a Fed rate cut leads to lower mortgage rates, the truth is more nuanced. Mortgage rates were already falling before the rate cut and increased immediately after. This fluctuation demonstrates that mortgage rates are driven by broader economic factors, such as employment data and inflation trends, not just the Fed's actions.


What Really Impacts Mortgage Rates?

Mortgage rates are primarily influenced by mortgage-backed securities (MBS) traded on Wall Street. These securities fluctuate based on macroeconomic and geopolitical events, which can cause daily changes in rates. For example, a banking crisis in Europe or economic instability in Asia can affect U.S. mortgage rates.


The Federal Funds Rate and mortgage rates do follow similar patterns, but the spread between them varies. The key takeaway is that mortgage rates don’t react directly to the Fed's rate cuts. Instead, they respond to broader market forces and global events.


Should You Buy or Refinance Now?

Waiting for the "perfect" rate could cost you. If you’re ready to buy a home or refinance, focus on locking in a mortgage that fits your financial situation today. Rates may fluctuate, but refinancing is always an option down the line.


Stay ahead of the market by working with VIP Mortgage Group for personalized guidance on mortgage rates and the best time to secure your loan.

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