Don't shoot the messenger
One of the most widely misunderstood dynamics of my business is the belief that a Fed rate cut immediately lowers mortgage rates. Well, I hate to break it to you, but the Fed doesn't touch mortgage rates; however they make monetary policy changes that shake our world and yes... interest rates. So allow me to support my "click-bait" headline with some comments and fact.
The main fact is that the Fed doesn't directly touch mortgage rates. The Fed sets a target for the "fed funds rate" after reviewing mountains of current economic data. The rate that they tweak is the interest rate banks charge each other for overnight loans. Those loans are called fed funds, which lowers the as the Fed lowers interest rates. This change, albeit small or great, has great impact on the markets. But the way it moves mortgage rates is quite the conundrum. I'll explain...