02/25/2026
If you're one of my mortgage clients who expressed interest in refinancing, you're going to get a call from me when bond yields tag the bottom of the channel on the chart because as you can see, that's generally as good as you are going to do for quite awhile, especially if the channel is sloping upwards as it is now.
When you tell me, "the Fed is going to lower rates, I will wait" I want to scream, and here is why. If you look at the chart you will notice some cyan ellipses on it. Those are all the dates the Fed "lowered" rates the last 2 years.
If you pay attention, you will notice that 2 of the three uptrends in rates we have had the last 2 years were while the Fed was cutting rates at almost every meeting.
The Fed lowers the rate banks lend money to each other over night. 10 year Treasury (chart) and mortgage rates are established by what investors are willing to loan money to the government or homebuyers for many years at.
When the Fed is lowering it's rate while the economy is still healthy and inflation a little too high, those investors view it as inflationary, and inflation erodes the value of the money they are loaning.
As a result they start demanding a higher rate of return and bond yields and mortgage rates actually increase.
The Fed has never actually lowered mortgage rates. If mortgage rates are dropping it's because the economy is in the tank, and the Fed lowering it's rate is actually causing mortgage rates to decline less than they would if the Fed just stayed out of it.
The Fed keeping monetary policy tight in a recession would probably cause a depression, so not a great idea, but stop giving them credit for lowering mortgage rates. The effect the Fed has on long term borrowing costs is generally the opposite of what the Fed is doing with the rate it sets.
If the Fed reduces it's rate, they are causing mortgage rates to be higher than they would be otherwise. If the Fed is raising rates, it is actually causing mortgage rates to be lower than they would be absent the Fed action.
Please note that's not the same as the Fed raising rates causes mortgage rates to drop. The actual effect may be mortgage rates dropping, but it could also be mortgage rates increasing less than they would have.
If you are sure the economy is going to grind to a halt next week, then sure, wait for rates to drop because they almost certainly will. But if you are waiting because the Fed is going to lower rates, please keep that to yourself unless you want to cause my eyeballs to roll out of their sockets.
