Fed Cuts Rates, But Mortgage Rates Went Up?! Here’s What You Need to Know

The Federal Reserve cut its short-term interest rate by 0.25% on September 17, 2025.

Most people think that means mortgage rates should also go down. But the opposite happened—mortgage rates actually went up that same day.

Here’s the simple version of why, and what to tell your clients.

Why Did Mortgage Rates Go Up After a Rate Cut?

Think of it like this:

• The Fed controls short-term rates (like credit cards, car loans, HELOCs).

• Mortgage rates follow the bond market, especially the 10-year Treasury.

• On Fed day, investors don’t just listen to the rate cut—they listen to what the Fed says about the future.

What happened:

• The Fed cut rates, but…

• Chair Powell made it clear this was a “wait and see” move, not the start of big, fast cuts.

• Investors realized rates might not fall as quickly as hoped.

• Bond yields went up, and mortgage lenders raised rates with them.

Key takeaway: Mortgage rates are based on expectations, not just the Fed’s cut.

What This Means for Buyers

• Monthly payments may be slightly higher today than yesterday, even though the Fed cut.

• A $400,000 mortgage can swing by $100–$200/month if rates move just 0.25%.

• Buyers shouldn’t wait around for “big drops” that may not come quickly.

Agent tip: Pull fresh payment quotes for all active buyers. If they were at the edge of qualifying, they might need to adjust price range or use a buydown.

What This Means for Sellers

• Some buyers are more payment-sensitive than ever.

• A small bump in rates can shrink the buyer pool.

• Tools to keep deals moving:

  • Seller-paid buydowns (temporary or permanent).

  • Closing cost credits to help buyers lock sooner.

  • Strong marketing that highlights monthly affordability, not just list price.

Action Steps for Real Estate Agents

• Explain it simply to clients: “The Fed cut a short-term rate, but mortgage rates follow long-term bonds. Investors didn’t hear the promise of more cuts, so mortgage rates actually ticked up.”

• Check every pre-approval: Ask lenders to rerun numbers this week. Don’t risk a deal falling apart because payments went up.

• Promote affordability tools: Work with lenders on seller-paid buydowns, rate-lock programs, or adjustable options (when appropriate).

• Educate your database: Post a short update on social media or send an email:

  • Headline: “Why Mortgage Rates Went Up After a Fed Cut”

  • Keep it to three bullets: Fed cut → market cautious → mortgage rates higher for now.

  • Offer to connect people with a lender for updated numbers.

Bottom Line

• A Fed cut doesn’t always mean mortgage rates go down.

• Today was proof: rates went up because markets focused on Powell’s cautious message, not the cut itself.

• For agents, this is a chance to show your value by explaining what happened in plain English and helping clients adjust.

The market will stay bumpy. Your job is to guide buyers and sellers through the noise and keep transactions on track.

Where do you think mortgage rates are heading for the rest of this year? Leave a comment below or share with a colleague in an upcoming CE Class!

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Works Cited

Federal Reserve. “Federal Reserve issues FOMC statement,” Sept. 17, 2025.

Federal Reserve. “Summary of Economic Projections,” Sept. 17, 2025.

Mortgage News Daily. “Mortgage Rates HIGHER (Not Lower) After Fed Rate Cut,” Sept. 17, 2025.

Reuters. “Fed lowers rates by a quarter point; Powell says it was a risk management cut,” Sept. 17, 2025.

Powell press conference transcript, Sept. 17, 2025.