Mortgage Rates Rise Despite federal Reserve Rate โCut, Sparking Housing market Concerns
WASHINGTON – September 20, 2025 – In a surprising โturn, โmortgage rates are climbing even after theโฃ Federal โReserve lowered interest rates this week, addingโ pressure to the โขhousing market and raising questions about the effectiveness of monetary policy in influencing consumer borrowing costs.The โunexpected move highlights the โcomplex interplayโ of factors driving long-term interest rates, including global economic conditions and investor expectations about future economic growth.
The 10-year Treasury yield, โa benchmark for mortgage rates, hasโ remained largely unchanged since the beginning ofโฃ 2024,โ despite multiple rate cuts โฃby the Fed, according toโข marketโ analysis.This suggests that forces beyond the central bank’sโค control are at play.
“It’s noteworthy that the 10-year note yield is little changed compared with early โ2024, despite theโ Fed โคcutting rates multiple times since then,” noted Peter Boockvar, of One Point.
The increase in longer-term yields directly impacts โฃthe cost ofโข major โขpurchases financed with loans, including homes and automobiles, asโข well as credit card interest rates. Mortgage ratesโค rose following the Fed’s recent rate cut, โreversing a trend that saw them โreach a three-year low ahead ofโข the central bank’s action.
the housing market is already โขfeeling the strain. Homebuilder โคLennarโฃ (LEN) reported missing wall Street’s revenue expectations for โฃthe โthird quarter on Thursday and โคissued weak guidance โfor deliveries in the current quarter. Lennar Co-CEO Stuart Miller stated the company faced “continued pressures” and โค”elevated” โขinterest โrates throughout much of the third โquarter.
Bond market investors โขare โfocused on the “bigger picture,” according to Chris Rupkey, chief economist at FWDBONDS. “It’s not the journey, it’sโ the destination,” he โฃsaid, explainingโข that investors are assessing the Fed’s projections forโค future rate cuts and the perceived neutral rate on the Fedโค fundsโฃ rate to โฃdetermine the “end game.” “The โbond market really will react once it is assured that the โcentral bankโข is going to lower theโฃ rates dramatically.”
Boockvar also pointed to the influence of internationalโค yields, which are also trending upward, emphasizing the importanceโค of monitoring global economicโฃ developments and the actions of foreign central banks.
Though, Rupkey cautioned against celebrating declining yields, as they frequently enough signal an impending recession. He โattributed โthis week’s yield increases, in โคpart, to falling unemployment โคfilings,โ suggesting a reduced risk of an economic downturn.
“Don’t rejoice so muchโ about gettingโ bondโ yields down, as it may mean that it’s impossible for you to find work,” Rupkey warned. “Unluckily, the bond market โคonly really embracesโข bad newsโฆ terrible news.”
