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Home News Macro

Fed Rate Cuts Paradoxically Drive Mortgage Rates Higher, Challenging Housing Market

by Team Lumida
December 20, 2024
in Macro
Reading Time: 2 mins read
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September Rate Cut Likely as Job Market Risks Increase, Says Fed

"Federal Reserve Bank of New York Building" by epicharmus is licensed under CC BY 2.0

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Key Takeaways:

Powered by lumidawealth.com
• 30-year mortgage rates climb to 6.7% from 6.1% since Fed’s September rate cuts
• Treasury yields surge despite lower Fed rates, driven by inflation concerns
• Housing market faces continued pressure as mortgage applications remain stagnant
• Market expectations for future rates trending higher despite current rate cuts

What Happened?

Contrary to expectations, mortgage rates have increased following the Federal Reserve’s interest rate cuts initiated in September. The average 30-year mortgage rate has risen approximately 60 basis points to 6.7%, tracking the surge in 10-year Treasury yields. This movement comes despite the Fed’s dovish pivot, as longer-term market expectations and inflation concerns overshadow immediate rate cuts.

Why It Matters?

This disconnect between Fed policy and mortgage rates highlights the complex dynamics affecting housing affordability. The increase in rates reflects broader market concerns about persistent inflation, elevated budget deficits, and potential policy changes under a future Trump administration. The Fed’s revised inflation forecasts and acknowledgment of upside risks have further complicated the outlook. This environment continues to challenge potential homebuyers, with mortgage applications remaining subdued.

What’s Next?

Market participants should monitor several key factors: the trajectory of inflation and its impact on Fed policy, movement in Treasury yields (particularly the 10-year), and potential political developments affecting fiscal policy. The housing market’s response to these higher rates will be crucial, especially given stagnant mortgage applications. The divergence between short-term Fed policy and longer-term market rates suggests continued volatility in mortgage costs, potentially extending the challenges in housing affordability. Investors should watch for any shifts in inflation trends or Fed messaging that could alter this dynamic.

Tags: Federal ReserveInterest Rates
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018