Despite the Federal Reserve's decision to cut its benchmark interest rate this week, mortgage rates moved in the opposite direction, highlighting the market's sensitivity to forward guidance over immediate policy action.

The average rate on a 30-year fixed mortgage jumped 20 basis points over Wednesday and Thursday, reaching 6.33%, according to Mortgage News Daily. This mirrored a pattern seen after the Fed's previous rate cut in September, when mortgage rates also rose following the announcement.

The increase is attributed to bond market reactions to Chairman Jerome Powell's post-meeting commentary. While the market had fully priced in the rate cut and was anticipating a strong likelihood of another in December, Powell struck a more cautious tone, stopping short of committing to further easing. This prompted a reassessment of expectations and a corresponding rise in Treasury yields, which directly influence mortgage rates.

"The market’s enthusiasm for 3 Fed rate cuts in 2025 had grown a bit too large for the Fed’s liking," explained Matthew Graham, chief operating officer at Mortgage News Daily. Powell's remarks led to "a mild re-set in yields back to levels that are more consistent with a December cut being a solid possibility, but not a full lock."

The recent downward trend in rates had already spurred significant refinance activity, with applications soaring 111% year-over-year last week, according to the Mortgage Bankers Association. However, the same lower rates provided only a minimal boost to home purchase applications, suggesting ongoing affordability challenges for buyers even before this week's reversal.