Mortgage Rates Fell, Then Rose. What Comes Next?

Many would-be home buyers are still hoping for mortgage rates to come down as the Federal Reserve cuts interest rates. How much they will fall is unclear.

Rafael Corrales, a real estate agent in Miami, recently showed houses to a young couple hoping to move from a rental into a home. They had been lured to the market after hearing that mortgage rates had come down.

But when the couple went to get approved for a home loan, they found that the borrowing costs had ticked up once again.

“They were very confused,” said Mr. Corrales, 49, an agent for Redfin. It pushed them back onto the sidelines of the housing market, and they’re now staying put in the hope that rates will fall again.

Mortgage rates fell steadily from this spring through September, as economic data slowed and as investors began to expect a steady string of interest rate cuts from the Federal Reserve. But the rate on a 30-year mortgage has reversed course and climbed sharply over the past month to 6.79 percent nationally, from about 6.1 percent at the start of October.

The move has come as a shock to some home buyers, who had waited many months for Fed officials to begin lowering borrowing costs, hoping that they would bring relief to the mortgage market.

The logic was fairly simple. When the Fed lowers its benchmark interest rates, the downward shifts tend to trickle through financial markets to lower other interest rates. While the biggest impact is on short-term rates, the effect can extend to 10-year Treasury notes, which mortgages closely track. And the Fed is, in fact, adjusting policy. Officials cut interest rates for the first time in four years in September, and they followed with a quarter-point rate cut on Thursday.