Why Mortgage Rates Rose After a Fed Cut: What It Means for the rest of
The Federal Reserve recently cut its benchmark rate for the first time in nine months. Many borrowers and investors hoped that mortgage rates would immediately move lower, but the opposite happened. Mortgage rates actually ticked up in the days that followed. The reason is that the Fed funds rate controls short term borrowing costs such as credit cards, HELOCs, and many commercial loans, but it does not directly determine mortgage pricing. Thirty year mortgage rates are tied more closely to the yield on the ten year Treasury along with a risk premium that investors require when buying mortgage backed securities. Because inflation risk remains a concern, investors are demanding a wider spread, and that has kept mortgage rates stubbornly in the low to mid six percent range.
The current outlook suggests that mortgage rates will hold in this range through much of 2025. Residential affordability will stay tight and that means home prices are more likely to remain flat than to rise sharply. On the commercial side, the story could be different. Commercial loans are often structured with shorter terms or adjustable features. Since short term borrowing costs are influenced more by Fed actions, parts of the commercial real estate market could see more relief than the residential market over the next two years.
For brokers, the main takeaway is to continue underwriting deals based on current rates rather than on hopes of a major drop. A Fed cut does not translate into an equal cut in mortgage rates, and explaining that difference clearly helps set client expectations. Strong documentation is critical. Income, assets, and occupancy details need to be complete and accurate, because tighter affordability means fewer second chances. Brokers should also be prepared with creative options for clients who fall outside of traditional lending guidelines. Equity based lending can make the difference between a file that stalls and a file that closes.
For borrowers and investors, the advice is to plan around today’s numbers. If a deal works at current rates, it can be worth moving forward, with the option to refinance later if rates improve. Assuming that mortgage rates will drop quickly can leave buyers unprepared. The better strategy is to budget conservatively, build in timeline buffers for appraisals and title work, and track the indicators that actually drive long term mortgage pricing. Inflation readings, labor market data, and the ten year Treasury yield provide more insight than any single Fed announcement.
Recent data highlights why vigilance is important. According to Cotality, formerly CoreLogic, suspicious mortgage applications increased by more than seven percent in the first quarter of 2025 compared to the prior year. Transaction risk was one of the fastest rising categories, involving situations where details of a home purchase were not fully disclosed such as hidden concessions, non arm’s length transactions, or quick resales. Although overall fraud remains relatively uncommon, the trend is upward, and regulators are using new tools including artificial intelligence to detect irregularities. For investors, the costs of misrepresentation can be severe, from repayment demands and penalties to reputational damage and even criminal liability.
At Pacific Direct Mortgage we believe the best opportunities are built on trust, clarity, and speed. We focus on the property’s as is value and equity, which allows us to move quickly and provide solutions when traditional financing does not fit. We work with brokers, agents, and borrowers across California to deliver certainty and responsiveness in a market where delays and uncertainty are common.
The bottom line is that mortgage rates follow the ten year Treasury and investor risk spreads more closely than the Fed funds rate. With inflation concerns still active, mortgage rates are expected to stay in the low to mid six percent range through much of 2025. Success comes from working with today’s reality, setting clear expectations, and having flexible financing paths ready. When you need an equity based solution that closes on time, Pacific Direct Mortgage in Santa Rosa is here to help.
Husband & Wife Team Phone: 707‑708‑0797 / Office: 1400 N. Dutton Ave #22 Santa Rosa, CA 95401 Ken: CA DRE Broker #01858042 / NMLS #1221130 Ari: CA DRE #01858152 / NMLS #2170867 Ken & Ari are a husband & wife team with combined 3+ decades in real estate and private money industries. They own Pacific Direct Mortgage & Real Estate, specializing in Private Money loans (also known as Hard Money home loans). Having helped thousands of Borrowers & working directly with Brokers, Agents and Lenders to help when needed with fast, flexible, alternative financing for real estate purchases and refinances throughout California. No issues with DTI ratios, credit issues, property condition, difficult to prove income ‑ we want to help!
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