So the Federal Reserve Cut Interest Rates and Mortgage Interest Rates Went Up!

Hello Hampton Roads,

Many people believe that when the Federal Reserve cuts interest rates that mortgage rates should go down, but that's not necessarily the case!

"Say What?" via GIPHY

It didn't happen with latest .25% rate cut last Wednesday, and in fact mortgage rates for a-30 year fixed loan rose to 3.73% from 3.56% a week ago--the largest one-week increase since October 2018!

Last Wednesday the Fed cut the federal funds rate .25% from 2.25% to 2.00%. The federal funds rate is the interest rate that banks charge each other to borrow money overnight. Since it is a short-term interest rate, it affects short-term loans like credit cards and car loans, variable rate loans like ARMs (adjustible rate mortgages), and home equity loans. These loans tend to move in the same direction as the rate cut. However, longer-term loans like the 30-year fixed are less affected.

The 30-year mortgage rate is more affected by longer-term securities like the 10-year treasury note.
However the recent interest rate increase is said to have been caused by a strong economic environment and a higher demand for mortgages.

Thanks for Reading,


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