Why Mortgage Rates Went Up After the Fed's Big Cut
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Hello and welcome to another episode of the Oddlots podcast. I'm Tracy Alloway.
And I'm Joe Weisenthal.
Joe, have you noticed mortgage rates recently?
Yeah. They've been up. In fact, we're recording this October sixteenth. Mortgage rates have been rising. And in the last couple of weeks, mortgage applications, according to new data out today, have been down. Refi applications have been down. And of course it's all ironic because we got that rate cut.
Yeah, that's right. So benchmark rates have been cut by 50 basis points. So we've moved to like five percent from the five point five percent on the upper bound. That happened on September eighteenth, but since then, as you point out, mortgage rates have actually gone up. So I think we've moved from like six point six percent on the 30 year to something like six point nine percent. we're recording this, we were very close to seven percent last week. And just intuitively, that is not what you would expect to see happen when benchmark rates are getting cut. Yeah.
All right. I don't want to ever insult fellow colleagues or not colleagues, but other people in the media. And actually I have no basis for this, but in my mind, there are a bunch of explainers out there on the internet. It's like, what do Fed rate cuts mean for you? And someone put a bullet in there that said, Oh, they mean lower mortgage rates and stuff like that. And obviously there's a connection between Fed rates and what people people pay for a 30-year fixed rate mortgage or some other flavor of mortgage, but it's clearly not, there's reasons why it's not one-to-one. And there's nothing mechanical about the day the Fed cuts rates that suddenly borrowing costs for homeowners drop.
Yeah, that's right. And this actually came up in our interview with Chicago Fed President Austin Goolsby, talking about what is the impact of rate cuts on the overall economy. And he talked about how everyone has a fixed rate mortgage now. And so that doesn't necessarily feed through. But I guess it does pose some existential questions for monetary policy transmission. Like if the benchmark rate was a person, it would be that. That guy like pointing at himself in the mirror, criticizing his own irrelevance, I guess.
That's interesting. That's interesting. I wasn't sure where you were going with that, but that's interesting.
That's just what like springs to mind.
You know what I don't get? I mean, I kinda get it because we've done episodes on mortgages, but like most mortgages in this country are backed by the US government or Fanny and Freddie implicitly and now more or less explicitly. Like, why can't we all just get mortgages at like the ten year rate? Or the thirty year rate? You know, like, seriously, if the government can borrow at the thirty year rate and the government is backstopping it, why don't we just all get those same prices for a mortgage?
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