Fed Cuts Interest Rates, but Mortgage Rates Surge
For the third time in 2024, the Federal Reserve cut interest rates on Wednesday. However, in a surprising move, mortgage rates increased. According to Freddie Mac data, the 30-year fixed-rate mortgage jumped to 6.72% for the week ending December 19, up from 6.60% the week prior.
At an intraday level, the 30-year fixed-rate mortgage reached 7.13% on Wednesday, before settling at 7.14% on Thursday, according to Mortgage News Daily. The sudden increase may be attributed to the Fed’s dot plot, which showed fewer signs of additional rate cuts in 2025.
The dot plot, which indicates individual Fed officials’ expectations for interest rates, showed officials forecasting a benchmark lending rate of 3.9% by the end of 2025, within a target range of 3.75% to 4%. This was lower than the current rate range of 4.25% to 4.50%.
The unexpected spike in mortgage rates may also be linked to the recent dot plot, which includes Trump’s desired policies on tariffs, immigration, and tax cuts, all of which are inflationary, according to Melissa Cohn, regional vice president of William Raveis Mortgage in New York.
Additionally, mortgage rates tend to move in anticipation of Fed meetings, said Jacob Channel, a senior economist at LendingTree. With the Fed’s actual meeting already behind us, mortgage rates may not experience dramatic changes in the near future.