Several things happen on Fed Day--especially on the 4 out of 8 examples with updated rate forecasts from Fed members.  The official announcement of a rate cut is typically the least important aspect.  In fact, it is usually entirely unimportant in terms of its impact on mortgage rates. Instead, the bonds that determine mortgage rates are much more likely to react to the Fed's dot plot (the chart showing each Fed member's rate forecast over the next few years) and the press conference with the Fed Chair. The dots are released at 2pm at the same time as the rate cut announcement.  The press conference follows at 2:30pm and usually lasts 50 minutes. This staggered timing makes for plenty of back and forth volatility on occasion and today was a prime example.  The dots helped bonds because they signaled better odds for two additional cuts in 2025 as opposed to only one.  The market was mostly expecting that, but it wasn't fully priced-in to prevailing rates.  Things changed during Powell's press conference and bonds ended up more than reversing the initial move. Powell framed today's cut as a "risk management" cut and emphasized that the forecasts in the dot plot do not represent a plan for future cuts. Rather, the Fed will continue to take things on a meeting by meeting basis and make decisions based on the new data that becomes available over that time. As the underlying bond market responded, most mortgage lenders issued mid-day changes to the rates announced this morning. The net effect is that mortgage rates are most certainly HIGHER this afternoon compared to yesterday's latest levels, not to mention this morning's. 

Mortgage rates dropped sharply lower today relative to the amount of movement in the underlying bond market with the average lender right in line with the lowest levels since late 2022. Because rates are directly tied to the prices of those bonds, the correlation tends to be almost perfect over time. [thirtyyearmortgagerates] But there are always scattered examples of one leap-frogging the other. These inconsistencies can arise for several reasons. In today's case, it happened due to late-day strength in bonds yesterday afternoon coupled with the structure of the underlying mortgage bond market. An explanation of the latter would be woefully esoteric in the context of a daily mortgage rate update--even for industry professionals. In the simplest possible terms, it has to do with the range of interest rates allowed in each grouping of mortgage backed securities (MBS). As investor sentiment shifts in favor of the next lower grouping, it effectively greases the skids for rates to slide down into the range associated with that grouping. The overall set-up is reminiscent of September 2024 when rates were doing the same thing for the same reasons ahead of Fed meeting with a virtual 100% chance of a rate cut. Back then, mortgage rates moved paradoxically higher after the Fed rate cut.  The same thing could happen this time, but it's by no means guaranteed. In fact, last year's Fed rate cut wasn't the catalyst for rising mortgage rates. Instead, it was an upbeat shift in economic data in early October. In other words, rates will take their next major cues from incoming economic data over the next few weeks. 

Mortgage rates have done almost nothing but move lower over the past 4 months. The first Fridays in August and September account for about half of the total drop thanks to weaker results in the jobs report. Since the September 5th jobs report, rates have held a sideways-to-slightly lower range that's resulted in several additional "lowest since" headlines. There's nothing special about today in that regard. Bonds (which dictate rates) happened to improve, so rates inched to another 11+ month low. Today's levels aren't appreciably different than last Friday's.  Volatility is a bigger risk over the next two days thanks to economic data tomorrow morning and the Fed announcement on Wednesday. 

The underlying bond market (which dictates the rates offered by mortgage lenders) weakened moderately overnight.  Weaker bonds equate to higher rates, all else equal.   "Higher rates" is contrary to many media outlets' coverage this week, but there's an important reason. Most news organizations that cover mortgage rates rely on Freddie Mac's weekly rate survey for their once-a-week update. Additionally, when Freddie's rate raises/falls appreciably, it receives even more attention. This frequently creates problems due to the timing and methodology of Freddie's survey. Specifically, the survey is an AVERAGE of the rates seen over the 5 days (Thu-Wed) leading up to Freddie's Thursday release. As such, if rates happen to fall sharply on a Friday (as was the case last week), our DAILY rate tracking will reflect that on Friday while Freddie won't catch up until the following Thursday (yesterday, in this case). By that time, rates hadn't moved any lower, and now today, they're actually a bit higher. All that to say, the rate drop you're hearing about from Freddie is the same rate drop we told you about last Friday.  There's been no meaningful improvement since then, and in fact, a modest increase in rates today. Today's move in bonds/rates wasn't driven by anything specific  and shifts of this size don't demand concrete justification in underlying data or events. It could simply be the case that traders were closing out trading positions for the week and the modest uptick in yields/rates was the incidental result. 

Today's inflation report (the Consumer Price Index or CPI) certainly had a chance to create volatility for rates, but things ended up staying fairly calm.  There are multiple subheadings of data that the bond market cares about when it come to CPI. Most of them were in line with expectations, or close enough to avoid surprising investors. The absence of surprise gave way to some improvement in bonds which, in turn, allowed mortgage lenders to start the day at just slightly lower levels.  Additionally, a higher reading in this morning's weekly jobless claims report may have helped. Officially, the top tier 30yr fixed rate at the average lender just barely scratched out a new 11-month low, but most borrowers would see little--if any--difference compared to the past 4 days.