Fed rate cuts are imminent… Why are US mortgage rates surging in the opposite direction?

Source: BlockMedia Original Title: The Fed’s Rate Cut Is Imminent… Why Are US Mortgage Rates Surging in the Opposite Direction? Original Link: https://www.blockmedia.co.kr/archives/1016899 With the Federal Reserve’s (Fed) benchmark rate cut imminent, contrary to market expectations, US mortgage rates are actually on the rise. Typically, expectations of a rate cut lead to a simultaneous decline in bond yields and mortgage rates, but this time the opposite trend is appearing, increasing confusion among homebuyers and market participants.

The US 30-year fixed mortgage rate rose by 9bp (0.09%p) from the previous day to 6.36%, marking the highest level in two weeks. This is interpreted as an unusual increase given the Fed’s anticipated rate cut. On the same day, the US 10-year Treasury yield also climbed to 4.17%, adding upward pressure to long-term mortgage rates.

Analysts say, “Market rates are not moving in the traditional manner,” and that “the result reflects market uncertainty about the Fed’s future policy path and concerns over inflation.”

Since the beginning of this year, the Fed has already lowered its benchmark rate several times within 2025, but the 30-year fixed mortgage rate has never dropped below 6%. The lowest level this year was 6.13% recorded in September–October, and the last time it was below 6% was 5.99% in February 2023. As a result, the mortgage market’s high-rate structure remains intact, which continues to weigh on homebuyer sentiment.

President Trump has continuously pressured the Fed for rate cuts since taking office and has shown an intention to boost the US housing market by lowering mortgage rates. However, as benchmark rate cuts have not actually led to a decline in long-term mortgage rates, the effectiveness of the Trump administration’s policies remains limited.

Due to high mortgage rates, real homebuyers and existing borrowers are seeking alternative options. In the current environment, more people are turning to adjustable-rate mortgage (ARM) products, which offer lower rates than fixed-rate mortgages. According to the Mortgage Bankers Association (MBA), as of the end of November, the average 30-year fixed mortgage rate was 6.32%, while the 5-year adjustable rate remained around 5.4%.