“The Fed Cut Rates — So Mortgage Rates Dropped, Right?” Well… Not Exactly

Did you hear? The Fed cut rates again!Whenever that headline hits, I always smile because I know what’s coming next — someone will say,

“Oh great. That means mortgage rates went down!”

I’ve been in real estate for over a decade, and I’ve heard that exact sentence more times than I can count. And honestly? It makes sense that people think that way — the two rates are connected, but not in the way most people imagine.

What the Fed Rate Actually Is

When you hear “the Fed cut rates,” they’re really talking about the federal funds rate — the rate banks charge each other for short-term loans.

It’s not something you or I borrow at directly, but it does influence things like credit cards, car loans, and even how confident banks feel lending money.

How That Relates to Mortgage Rates

Now, mortgage rates are a different story. They’re shaped by long-term factors — like the bond market, inflation, and what investors think the economy will do next.

So yes, when the Fed cuts rates, it can help mortgage rates trend lower, but it doesn’t happen instantly or automatically. Sometimes rates even stay the same (or go up!) depending on what’s happening elsewhere in the economy.

Why the Fed Cuts Rates in the First Place

The Fed doesn’t just wake up and decide, “Let’s make mortgages cheaper!”When they lower rates, it’s usually because they’re trying to stimulate the economy — encouraging businesses to invest, people to spend, and jobs to grow. It’s all about keeping the economy balanced.

My Two Cents After 11 Years in Real Estate

I’ve learned that understanding the why behind the numbers is powerful. It keeps you from panicking when rates move or headlines sound dramatic.

So next time you hear, “The Fed just cut rates!”, remember:That’s good news for the economy overall — but it doesn’t mean your mortgage rate just dropped overnight.

And if you ever want to chat about what all of this means for your own buying or selling plans, I’d love to walk you through it (without the financial jargon!).