Mortgage Rates Rise Despite federal Reserve Rate Cut, Sparking Housing market Concerns
WASHINGTON – September 20, 2025 – In a surprising turn, mortgage rates are climbing even after the Federal Reserve lowered interest rates this week, adding pressure to the housing market and raising questions about the effectiveness of monetary policy in influencing consumer borrowing costs.The unexpected move highlights the complex interplay of factors driving long-term interest rates, including global economic conditions and investor expectations about future economic growth.
The 10-year Treasury yield, a benchmark for mortgage rates, has remained largely unchanged since the beginning of 2024, despite multiple rate cuts by the Fed, according to market analysis.This suggests that forces beyond the central bank’s control are at play.
“It’s noteworthy that the 10-year note yield is little changed compared with early 2024, despite the Fed cutting rates multiple times since then,” noted Peter Boockvar, of One Point.
The increase in longer-term yields directly impacts the cost of major purchases financed with loans, including homes and automobiles, as well as credit card interest rates. Mortgage rates rose following the Fed’s recent rate cut, reversing a trend that saw them reach a three-year low ahead of the central bank’s action.
the housing market is already feeling the strain. Homebuilder Lennar (LEN) reported missing wall Street’s revenue expectations for the third quarter on Thursday and issued weak guidance for deliveries in the current quarter. Lennar Co-CEO Stuart Miller stated the company faced “continued pressures” and ”elevated” interest rates throughout much of the third quarter.
Bond market investors are focused on the “bigger picture,” according to Chris Rupkey, chief economist at FWDBONDS. “It’s not the journey, it’s the destination,” he said, explaining that investors are assessing the Fed’s projections for future rate cuts and the perceived neutral rate on the Fed funds rate to determine the “end game.” “The bond market really will react once it is assured that the central bank is going to lower the rates dramatically.”
Boockvar also pointed to the influence of international yields, which are also trending upward, emphasizing the importance of monitoring global economic developments and the actions of foreign central banks.
Though, Rupkey cautioned against celebrating declining yields, as they frequently enough signal an impending recession. He attributed this week’s yield increases, in part, to falling unemployment filings, suggesting a reduced risk of an economic downturn.
“Don’t rejoice so much about getting bond yields down, as it may mean that it’s impossible for you to find work,” Rupkey warned. “Unluckily, the bond market only really embraces bad news… terrible news.”
