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The 30-year mortgage rate shot up the day after the Federal Reserve cut interest rates.

Hours after the Federal Reserve cut its benchmark interest rate on Wednesday by 25 basis points, mortgage rates ticked up 9 basis points.

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The Fed announced Wednesday that it would trim its key policy rate by a quarter of a percentage point, bringing it to the range of 4% to 4.25%. Around the time of the announcement, Mortgage News Daily, a website that posts daily updates on rates, crashed - possibly the result of people flocking to the site to see how mortgage rates reacted. The company told MarketWatch it was looking into why the site was down that afternoon.

Mortgage News Daily later reported that the 30-year rate went up by 9 basis points (0.09%) to 6.22% on Wednesday. On Thursday, it reported that the 30-year rate had gone up by 15 more basis points, to 6.37%.

In contrast, a report by Freddie Mac measuring weekly averages for the 30-year rate found that mortgage rates fell to the lowest level in 12 months on Thursday. That’s because Freddie Mac’s report gathered information prior to and after the Fed’s decision was announced. The weekly report doesn’t survey lenders, but is based on actual mortgage applications to lenders across the country that are sent to Freddie Mac.

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Mortgage rates aren’t tied to the Fed’s interest-rate moves. Instead, they typically fall in advance of a Fed rate cut, as MarketWatch has reported, because bond investors are trying to anticipate where the central bank will go. Mortgage rates are priced off the 10-year Treasury note BX:TMUBMUSD10Y by adding a spread.

Hence, the 10-year Treasury yield is a better gauge of how mortgage rates will move - and the 10-year yield was trending higher Thursday.

Mortgage rates have decoupled from the Fed’s benchmark / targets, basically, because fiscal policy and the overall economic outlook are so bad that traditional monetary policy is no longer effective.

This is generally what economists would call ‘a bad sign’.

Myself, I would go so far as ‘a very bad sign.’

My condolences to anyone who confused their local new/used home salesperson with a qualified economist, if they told you, and you believed, something like 'Fed rate cuts will lower mortgage rates!"

  • sp3ctr4l@lemmy.dbzer0.comOPEnglish
    2·
    12 hours ago

    Roughly copy pasting part of my reply to another version of this thread elsewhere:

    You must have missed the last 2 or 3 years where the yield curve has been inverted, then univerted, then inverted again, and at least by the way I count it, inverted and univerted a 3rd time.

    Recessions tend to happen rather rapidly when the yield curve uninverts.

    Not usually during the inversion period.

    Roughly, think of the curve inversion period being when a whole bunch of investments are being moved around in the background (uncertainty), and then roughly when the curve uninverts, well now the money has placed its bets on what is going to happen, which sectors will trend down and which will be safe havens (certainty).

    So, we are now in the certainty phase, we will certainly have a broad recession (I’d argue it’ll be a 2nd Great Depression), following the longest period of yield curve nonsense in recorded history.

    To summarize:

    The yield curve inverting is your indicator that trouble is brewing.

    The downturn happens as or right after the yield curve uninverts.

    We are currently in the ‘yield curve has just uninverted’ timeframe, following the greatest yield curve inversion, in magnitude and duration, that has ever been seen in the US.