Why a Fed Rate Cut Doesn’t Always Mean Lower Mortgage Rates

When the Federal Reserve cuts interest rates, many homebuyers and homeowners immediately expect mortgage rates to drop. But here’s the truth: mortgage rates, especially 30-year fixed loans, don’t always follow the Fed.

The September 17 Fed Cut

On September 17, the Fed reduced its benchmark rate by 0.25%. Headlines everywhere suggested borrowing would instantly become cheaper.

But the numbers told a different story:

• 10-year U.S. Treasury yield: around 4.06%

• 30-year fixed mortgage rate: holding near 6.3%

Instead of falling, mortgage rates stayed elevated because the bond market didn’t move in the same direction as the Fed.

Why Mortgage Rates Follow the 10-Year Treasury

The key to understanding this is simple: fixed mortgage rates track the 10-year U.S. Treasury yield more than the Fed’s short-term rate.

• When Treasury yields rise, mortgage rates typically rise.

• When yields drop, mortgage rates are more likely to come down.

• Inflation expectations, investor demand for bonds, and risk premiums also feed into the final rate borrowers see.

That’s why mortgage costs didn’t immediately respond to the September cut—the 10-year Treasury yield actually ticked higher.

Short-Term vs. Long-Term Rates

• Short-term loans (credit cards, auto loans, adjustable-rate mortgages) move more directly with Fed decisions.

• Long-term fixed mortgage rates depend heavily on the bond market.

This distinction is why headlines about the Fed often feel out of sync with what borrowers experience.

Tracy’s Advice for Buyers and Homeowners

As a Bay Area agent, here’s what I recommend:

1. Watch the 10-Year Treasury — It’s the best indicator for where fixed mortgage rates are heading.

2. Get pre-approved early — If yields dip, you’ll be ready to lock in quickly.

3. Compare lenders — Even small rate differences can mean hundreds of dollars saved each month in our market.

4. Calculate the full cost — Look beyond the rate. Fees, points, and how long you plan to own the home matter just as much.

5. Think locally — In the Bay Area, a 0.25% change in rates can add or subtract hundreds of dollars to your monthly payment, which makes timing and preparation even more important.

   
   

Final Takeaway

A Fed rate cut sets the tone, but it’s the 10-year Treasury yield that sets your mortgage rate. On September 17, we saw that clearly: the Fed cut rates, but mortgage costs barely budged.

If you’re considering buying or refinancing, don’t just follow the headlines—pay attention to the bond market, and work with a professional who can guide you through the numbers.

💬 I’m Tracy Tang, your Bay Area real estate partner. If you’d like to understand how today’s rates impact your monthly payment or refinancing options, reach out—I’d be happy to walk you through it.