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Fed Rate Cuts vs. Mortgage Rates: What Buyers Should Know in Phoenix, Arizona

  • Writer: Brad Daniels
    Brad Daniels
  • Sep 18
  • 2 min read

One of the most common questions homebuyers and sellers ask is:

“When the Fed cuts rates, why don’t mortgage rates drop right away?”


It’s a smart question—and the answer comes down to the difference between short-term rates (set by the Federal Reserve) and long-term mortgage interest rates (like the 30-year fixed).


Blue percentage sign with a house icon on an orange background, symbolizing mortgage or interest rates. Minimalist design. Colors are Copper and Dark Blue.

The Role of the Federal Reserve


The Federal Reserve sets short-term interest rates, which impact:

  • Credit cards

  • Auto loans

  • Home Equity Lines of Credit (HELOCs)


So, when you see a Fed rate cut, you’ll notice faster changes in these types of borrowing costs.


Mortgage Rates Work Differently


Mortgage rates, especially the 30-year fixed rate, are not directly tied to the Fed. Instead, they’re shaped by:


  • Inflation expectations – Higher inflation tends to push mortgage interest rates higher.

  • Bond markets – Mortgage-backed securities (MBS) drive the cost of borrowing for long-term loans.

  • Investor sentiment – Often, markets adjust before the Fed even makes a move.


👉 Example: Recently, mortgage rates dipped before a Fed rate cut because investors had already priced in the expectation.


Do Mortgage Rates Ever Rise After a Fed Cut?


Surprisingly, yes. Here’s why:


  • It’s investor-driven, not Fed-driven. Mortgage rates follow the bond market, not the Fed’s short-term rate.

  • Money shifts into Treasuries. A cut often drives investors into safer assets, which usually lowers yields—but not always.

  • Inflation fears. If markets worry that a cut will fuel inflation, yields can rise, pushing mortgage rates up.

  • Short-term volatility. Mortgage rates sometimes jump right after a Fed move, before settling down later.


Bottom Line for Arizona Buyers & Sellers


  • Fed rate cuts = immediate effect on short-term loans.

  • Mortgage rates = shaped by inflation, bonds, and investor expectations.


If you’re considering buying or refinancing in Arizona, don’t assume a Fed cut guarantees lower mortgage rates. Instead, watch the broader economic picture, and connect with a trusted advisor who can help you time your move.


📌 Takeaway: Fed decisions matter, but mortgage rates dance to their own tune. Knowing the difference helps you make smarter real estate and financing choices.


Questions? Call Brad Daniels - East Valley Real Estate Team with My Home Group.

(602) 679-1025 | www.RelocateToAz.com

 
 
 

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