11/05/2025
I'm asked daily about the Mortgage interest rates..this is a VERY good explanation of how it works..worth the read!
I’ve seen the news (and received a few texts) about the Fed’s rate cut today, 0.25%, bringing their benchmark down to 3.75% - 4%.
Here’s the deal, that doesn’t mean mortgage rates are suddenly in the 4's. *I wish.* Fed rates and mortgage rates aren’t the same thing.
Mortgage rates don’t move in tandem with the Fed rate. The Fed controls short-term rates, things like credit cards, HELOCS, and auto loans. Mortgage rates are based on the bond market and investor demand for mortgage-backed securities.
Lenders also tend to price in what they expect the Fed to do ahead of time, so by the time the announcement happens, it’s usually already baked into current mortgage pricing.
So, while the Fed’s decision can influence the overall rate environment, it doesn’t automatically mean your mortgage rate drops overnight. It's a move in the right direction.
Long story short, The Fed cuts more so affect short-term lending, not long-term mortgage rates. It also does NOT mean that you'll be buying a car for 4%. It just means that the Fed Rate (which is the rate the banks charge each other for overnight lending) is 3.75% - 4%. At the end of the day the bank determines your rate. Supply and demand will always impact these rates; the Feds just determine the foundation for what direction rates can go.