FED cuts Rates by .25 Point

Imagine the Fed rate like the speed limit on a local street and the 30-year fixed mortgage rate like the highway speed limit. When the local speed limit changes, it doesn’t necessarily affect the highway limit directly because they serve different areas and have separate considerations.

The Fed might lower the local speed limit to encourage safer, slower traffic (short-term borrowing), but highway traffic (long-term mortgage rates) has to consider the weather (inflation), road conditions (economic growth), and traffic patterns (global markets). Just because the Fed lowers the local speed limit, it doesn’t mean drivers on the highway can or will immediately slow down—they’re responding to a whole different set of rules and conditions.

Similarly, while the Fed rate impacts short-term rates, mortgage rates are influenced by longer-term economic factors like inflation expectations and bond yields, so they don’t always follow the Fed’s moves directly.