Posted on October 8, 2025
Mortgage Rates Rise—Even After the Fed’s September Rate Cut
A Quick Look Back
In our September 17 market update, we noted that the Federal Reserve had approved a quarter-point rate cut, the first of 2025, and hinted that two additional cuts could follow by year-end. That move signaled a shift toward easing monetary policy after months of holding rates steady.
At the time, many expected those cuts to quickly translate into lower borrowing costs across the board. But as we’re seeing now, that hasn’t quite been the case.
Mortgage Rates Defy Expectations
Despite the Fed’s rate cut, mortgage rates have actually climbed for the second straight week. Freddie Mac’s most recent data shows the average 30-year fixed mortgage rate rising to 6.34%, up from 6.3% the previous week—and higher than the 6.12% average a year ago.
This trend underscores a key point we’ve long emphasized: the Fed doesn’t directly set mortgage rates. Instead, they’re driven by broader market forces such as:
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10-year Treasury yields, which move with market expectations
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Mortgage-backed securities (MBS) pricing
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Inflation trends and global economic pressures
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Investor sentiment and future-rate assumptions
As Realtor.com‘s Hannah Jones explained, “Mortgage rates closely track 10-year Treasury yields, which shift in real time with new economic data and market expectations.”
Why the Disconnect?
The Fed’s quarter-point cut was largely priced in before the official announcement. Investors were expecting it—and hoping for clearer guidance on additional cuts to come. When Fed Chair Jerome Powell stopped short of signaling a continued easing path, markets adjusted.
That recalibration sent Treasury yields higher, and mortgage rates followed. In short: rates dipped briefly, then rebounded, as investors reassessed the likelihood of more aggressive Fed action.
What It Means for Real Estate
For commercial and residential real estate, these dynamics highlight just how interconnected monetary policy and market sentiment have become.
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Borrowing costs remain elevated, affecting acquisition and refinancing activity.
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Valuations may face short-term pressure as investors adjust their underwriting assumptions.
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Opportunities still exist for strategic buyers who can navigate tighter capital conditions.
While the Fed’s intent was to stimulate growth and ease financing burdens, the broader market response shows that expectations often move faster than policy itself.
LPA’s Perspective
At Lowery Property Advisors, we continuously monitor how shifting rate environments affect asset values, deal volume, and investor positioning across commercial sectors.
This latest turn reinforces why real-time market intelligence is critical for clients making strategic decisions. Rates may moderate in coming months, but volatility remains the theme looking toward 2026.
