Mortgages Rates Keep Rising Despite Fed Rate Cuts

While the Federal Reserve has been cutting its key interest rate, mortgage rates have been heading in the opposite direction.

The elevated rates appear to be affecting buyer demand. A new report shows the number of people applying for mortgages decreased by 3.7 one week earlier.

"Applications decreased last week as rising mortgage rates continued to discourage buyers from entering the market and put a damper on purchase activity," said Joel Kan, the vice president of Mortgage Bankers Association. "The 30-year fixed rate increased for the fourth consecutive week, reaching 6.99 percent – the highest rate since July 2024."

The Federal Reserve reduced its benchmark federal funds rate from a range of 4.50% to 4.75% to 4.25% to 4.50% mortgage rates are more tied to longer-term rates like the Treasury 10-year note, which has been rising over concerns about inflation.

Ted Rossman, a senior industry analyst at BankRate told CBS News, that President-elect Donald Trump's tariff plans are playing a role in rates.

"A lot of it has to do with the election and the fear that many of president-elect Trump's economic policies could be inflationary and lead to higher interest rates," Rossman said. "So I'm talking about tariffs, less immigration, deficit-financed tax cuts, and things like that. The other thing is economic data has come in better than expected...[pushing] rates higher."

Rossman said the mortgage rates will likely remain over 6% for an extended period.

The U.S. 10-Year Treasury yields were rising again on Wednesday morning as they neared highs, hitting 4.72% overnight after rising 0.037%, not seen since 2023.

The average 30-year fixed-rate mortgage now stands at 6.75%.

Consumers have also not benefited much from recent rate decreases when it comes credit cards, which have only marginally lowered rates.

Auto loan rates remain elevated with the average rates of 9.01% for new cars and 13.76% for used cars.

In November, existing home sales surged to their strongest annual increase in over three years, climbing 4.8% from an annual rate of 4.15 million, according to data from the National Association of Realtors.

The Federal Reserve projects two interest rate cuts in 2025 and two rate cuts in 2026.