Why Mortgage Rates Can Rise Even When the Fed Cuts Rates (Seattle Buyers & Sellers: Timing Your Move)

Why Mortgage Rates Can Go Up Even After the Fed Cuts Rates

If you’ve been waiting to buy or sell in Seattle “when rates come down,” here’s something you should know: Mortgage rates can actually go up after the Federal Reserve lowers its rate.

That feels backward, but it happens. Here’s why, and what it means for your timing.

What the Fed actually controls (and what it doesn’t)

When you hear “the Fed cut rates,” we’re talking about the federal funds rate. That’s the short-term rate banks charge each other to borrow money overnight.

Your 30-year mortgage is not priced directly off that.

Mortgage rates mostly follow the bond market — especially longer-term bonds like the 10-year Treasury — plus some added risk pricing from lenders.

So you get this split:

• Fed cuts → short-term borrowing gets cheaper

• Mortgage lenders → not necessarily cheaper

Why? Because mortgage lenders care less about right now and more about the next 30 years.

Why mortgage rates can climb after a Fed cut

Here are the main drivers.

1. Inflation expectations

When the Fed cuts, the market sometimes reads that as: “The Fed is trying to boost the economy again.”

Stronger economy → more spending → more inflation pressure.

Inflation is bad for lenders, because it means the dollars they get paid back in 2035 are worth less than the dollars they loaned out in 2025. So investors demand a higher return to make up for that. When long-term yields go up, mortgage rates usually go up with them — even if the Fed is moving in the opposite direction.

So you can see:

• Fed: “We’re easing.”

• Market: “Okay, but then I want to be paid more to lend long-term.”

• Result: Higher mortgage rates.

This is most likely when inflation hasn’t fully cooled yet and the market thinks the Fed is getting looser a little too soon.

2. Risk

In a calm, predictable market, investors pile into safe assets like Treasuries. That pushes long-term yields down, and mortgage rates usually fall alongside.

But if the Fed cuts and people start worrying that the cut is happening because the economy might be wobbling, investors get jumpy. Uncertainty = more perceived risk in things like mortgages. More perceived risk = higher mortgage rates.

Yes, fear can push rates up.

3. Demand for mortgage-backed securities

Most mortgages don’t stay with your original lender. They get bundled and sold to investors.

If investors don’t love that product at the moment (maybe because they think rates will fall more later and everyone will refinance out) then investors want a higher yield to bother buying those loans.

Higher required yield = higher rate offered to you.

So the real question behind your mortgage rate is: “What return do investors want to lock this up for 30 years?” Not “What did the Fed just announce?”

Why this matters in Seattle specifically

If your plan is “I’ll buy/sell once rates drop,” you’re probably lining up with everyone else who is saying the same thing. By the time you act, the market may already have moved.

For buyers around Seattle:

• The second rates even look like they’re softening, more buyers come off the sidelines at once. We see this in real time: people waiting in Ballard, Bryant, West Seattle, etc., all re-enter on the same weekend.

• Inventory here is still tight. We don’t add meaningful new single-family supply in-city. So when demand jumps, prices react quickly.

That’s why “I’ll wait for rates to fall and then I’ll shop” often turns into “Now I’m in a 7-offer situation for a townhouse in Phinney.”

For sellers:

• You benefit from those buyer waves, but you don’t necessarily need to wait for some magical sub-6% headline rate to get strong activity.

• What you actually want is a moment where buyers feel like affordability just got a little better and they don’t want to miss it.

• That confidence window can be short. If mortgage rates bounce back up after a Fed cut (for the reasons above), the urgency can fade just as fast.

So the “perfect weekend to list” in, say, Greenwood or Bellevue isn’t always the lowest technical mortgage rate. It’s the weekend buyers believe things just became more doable.

How to make better timing decisions

Here’s the practical version.

1. Watch local competition, not national headlines.
For buyers: Your leverage is how many other buyers are writing on the same house you want. If there are only two comparable listings in your price range in Maple Leaf, that matters more than a Fed press conference.

For sellers: Your leverage is how many similar-but-slightly-cheaper options a buyer can point to that same weekend.

2. Be fully ready instead of “emotionally ready.”
For buyers: Get fully underwritten, documents in, so that when something good pops up you can move now, not after you “check on rates again.”

For sellers: Have prep, light repairs, staging, and photos lined up so you can launch into buyer confidence, not miss it because you needed three more weeks.

3. Look at total monthly payment and competition, not just rate.
A 6.75% loan where you’re the only offer can actually be better for you financially than a 6.25% loan where you have to waive every protection and bid $40K over ask.

People don’t always factor that in, and they should.

Bottom line

Fed rate cuts don’t guarantee lower mortgage rates. Sometimes the opposite happens, because mortgage rates are based on longer-term expectations: inflation, risk, and investor appetite.

For buyers: The real play is to be early in a quieter moment, not late in a frenzy.

For sellers: The real play is to be on the market at the moment buyers feel momentum, not necessarily when the national rate number looks the prettiest.

If you want to talk through your specific price range, e.g. “What does a realistic monthly payment look like for me in X neighborhood?” or “How much buyer traffic should I expect if I list in Y school district?” that’s the level where this becomes actionable.

Want to know more? Let’s talk.