When most people start thinking about buying a home or refinancing, one of the first things they do is start checking mortgage rates. And that’s when they might notice something a bit strange: mortgage rates don’t always seem to follow the Federal Reserve’s actions.

It’s true, while the Fed’s policies influence many aspects of the economy, they don’t directly set mortgage rates. So why do mortgage rates sometimes seem to go in the “wrong” direction, even after a Fed announcement?

Here are the key factors that can cause mortgage rates to move in unexpected ways:

1. The Fed Doesn’t Directly Set Mortgage Rates

The Federal Reserve, or the Fed, doesn’t directly control mortgage rates. It sets the rates for loans between banks, which can influence mortgage rates indirectly, but they’re not one and the same.

2. The Role of Mortgage-Backed Securities (MBS)

The rates lenders offer are more directly impacted by the price investors are willing to pay for mortgage-backed securities (MBS). Lenders bundle mortgages into these securities, which are then sold to investors. The higher the price investors pay for MBS, the lower mortgage rates tend to be—and vice versa.

3. Why Mortgage Rates Move on Expectations

Mortgage rates often respond to what the Fed says rather than what it does. For example, even if the Fed cuts rates, mortgage rates can rise if meeting notes or speeches signal that more increases are coming. Market sentiment and investor expectations play a big role here.

4. Other Influences on Mortgage Rates

Many factors beyond the Fed’s actions impact mortgage rates, including:

1. Economic conditions: Job growth, GDP, and inflation all impact investor confidence and mortgage rates.

2. Global events: Political and economic instability can shift money into or out of U.S. mortgage-backed securities.

3. Inflation: High inflation often leads to higher rates, as investors seek returns that outpace inflation.

4. The national deficit: Rising national debt can impact demand for U.S. investments, affecting mortgage rates.

We Follow Mortgage Rate Trends for You

As mortgage professionals, we monitor the market daily to help you navigate it. While no one has a crystal ball, our experience and market insights mean we’re here to help you make informed decisions about your mortgage options.

Have Questions? Reach Out. 888-616-9885

Whether you’re ready to buy, refinance, or just want to know more, we’re here to help you understand how market trends could affect your mortgage options.