Why mortgage rates jumped after the Fed’s rate cut — and what it means for Michigan
A surprise reaction to the September 17 rate cut
On September 17, 2025 the Federal Reserve lowered its key policy rate by 0.25 percentage point, bringing it down to a range between 4 % and 4.25 %cbsnews.com. Many people think that when the Fed cuts its rate, mortgage rates will automatically go down. In reality, that’s not how mortgage loans work.
The day the Fed acted, average 30‑year mortgage rates fell to around 6.13 % in the morning—the lowest reading since late 2022deseret.com. But by the afternoon, those same rates had climbed to roughly 6.22 %, and Freddie Mac’s weekly survey still put them near 6.35 %deseret.com. Why did rates go up right after a cut? The main reason is that investors had already expected the Fed’s decision and had lowered rates in the days leading up to the meetingdeseret.com. Once the announcement was official, traders “sold the news,” pushing bond yields—and mortgage rates—slightly higher.
What really drives mortgage rates
Mortgage rates are tied to the price of mortgage‑backed securities and 10‑year U.S. Treasury bonds, not directly to the Fed’s short‑term ratedeseret.com. Think of the Fed rate as the speed limit on a highway and mortgage rates as your actual driving speed. When the speed limit changes, drivers adjust, but they also respond to traffic, weather and other conditions. Similarly, mortgage lenders watch many signals:
Investor expectations: Because the market believed the Fed would cut rates, lenders had already lowered mortgage rates ahead of the meeting. After the announcement, investors realized there might be only two more cuts this yearcbsnews.com, so they adjusted their outlook and bond yields moved up, nudging mortgage rates higher.
The job market: Unemployment ticked up to around 4.3 % in August and may reach 4.5 % by year‑endcbsnews.com. A slowing job market can pull rates down because lenders expect fewer people to borrow and spend.
Inflation: The Fed’s preferred inflation measure (the PCE index) is still expected to run about 3 % in 2025cbsnews.com, above the 2 % target. Higher inflation makes investors demand more interest, which pushes rates up.
Because mortgage lenders pay attention to all of these factors, rates can move before or after the Fed acts. In other words, the Fed sets the tone, but the market plays the tune.
What Michigan homebuyers should expect
Economists like Jeremy Holmgren of Zions Bank Mortgage think rates could decline slowly later this year if the Fed cuts againdeseret.com. Danielle Hale from Realtor.com notes that consumers have already benefited from mortgage rates under 6.5 %, but there is still some risk of upward pressureinvestopedia.com. That means Michigan buyers should watch rates but not try to time the market perfectly. Rates often drop before major Fed announcementsdeseret.com, so waiting for the cut itself may backfire.
In practical terms:
Take advantage of dips: When rates briefly fall, lock in your mortgage. Even small changes can save a family hundreds of dollars over the life of a loan.
Be ready to refinance: Buying a home now and refinancing when rates move lower is often smarter than waiting and facing higher home prices as more buyers jump into the market.
Focus on your monthly budget: A 0.25‑point change in the Fed rate doesn’t change your payment as much as many people think. Talk with a loan officer to understand how today’s rates fit your family’s plans.
By understanding that mortgage rates follow bond markets rather than the Fed directly, Michigan buyers can make more informed decisions. The recent rate cut delivered a short‑term bump in rates, but the long‑term outlook depends on jobs, inflation and investor expectations. Staying flexible and keeping an eye on these factors can help you navigate the months ahead.
