REAL ESTATE

Going Off Script

The Fed has been cutting, but mortgage rates have been rising

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Mortgage rates usually follow the lead of the Federal Reserve. Here’s one example of how the typically script plays out: Early in the pandemic, the Fed slashed rates to zero, and mortgage rates followed suit, plunging to record lows, and spurring a housing boom and a refinancing frenzy.

The link between Fed policy and mortgage rates held strong in 2022 and 2023. The central bank aggressively raised rates to fight inflation, and mortgage rates shot up. The Fed raised its benchmark rate more than 500 basis points, or 5 percentage points, over a series of rate hikes. Mortgage rates marched up by a similar amount, and the “housing recession” ensued.

Now, though, that predictable script is being shredded. In recent months, Fed policy has displayed no direct effect on mortgage rates. Instead, the Fed is zigging, and the mortgage market is zagging.

Consider this: Just before the Fed began cutting rates in September 2024, the average 30-year mortgage rate was 6.20%, according to Bankrate’s national survey of lenders. By January 2025, the Fed had slashed the federal funds rate a full percentage point. Mortgage rates? They were up nearly a full point, hitting 7.19% as of Jan. 15. (The averagefell back…