Author: Emily Gregory

It’s been another eventful week in the financial world. The Federal Reserve announced a rate cut—something markets had been expecting—but the real story lies in how the market reacted afterward.

Here’s a quick breakdown of what happened and why it matters.

The Fed Cut Rates—But Mortgage Rates Went Up

The Fed reduced its benchmark rate by 0.25%, which was widely expected. However, Chair Jerome Powell made it clear that more rate cuts might not be coming soon. That comment surprised markets and triggered a selloff, pushing mortgage rates slightly higher.

It’s a pattern we’ve seen before: in the last five Fed rate cuts, mortgage rates actually moved up right afterward. Why? Because the market reacts to what’s expected in the future, not just what happens today. Traders had already priced in the cut—and when Powell hinted there may not be more to come, expectations shifted.

The Fed Is Dealing With a Lot of Uncertainty

Two big factors are making life tricky for the Fed right now:

Tariffs are driving up prices on certain goods, creating short-term “tariff inflation.” It’s usually a one-time bump, not an ongoing trend—but it makes inflation data harder to read.

The government shutdown means many key reports (like jobs and inflation data) are delayed, leaving policymakers with less information to work from. As Powell put it, “When you’re driving in the fog, you slow down.” That means the Fed is likely to move cautiously until things clear up.

What It Means for Borrowers

Even after this week’s bump, mortgage rates remain near their lowest levels of the year. But it’s a reminder that a Fed rate cut doesn’t automatically mean lower mortgage rates. Timing and market expectations matter.

The Fed’s next moves will likely depend on what happens with jobs and inflation in the coming weeks. For now, we’re still in a relatively favorable rate environment—so borrowers shouldn’t wait around for a “perfect” rate announcement that may never come.

The Bottom Line

Markets move on expectations, not headlines. While the Fed’s decision grabbed attention, it’s the context—tariffs, data delays, and labor trends—that will shape where rates go next.

Even with all the noise, today’s mortgage rates remain historically low, and that’s worth watching.

The highly anticipated Fed meeting is behind us, and while the Federal Reserve did cut its benchmark rate by 0.25%, mortgage rates actually ticked a bit higher afterward. That might seem confusing, so let’s break down what happened and why the market reacted the way it did.

What the Fed Announced

• The Fed voted to cut the federal funds rate by 0.25%, which was exactly what the market expected.
• They also released their “dot plot,” which shows where they think rates are headed. It pointed to two more potential cuts later this year, likely in November and December.

On paper, both of these developments sounded like good news for lower borrowing costs. So why didn’t mortgage rates drop?

Why the Market Didn’t Rally

This is a classic case of the market “pricing it in.”

In the weeks leading up to the meeting, traders were already expecting this exact outcome. They had been buying bonds in anticipation, which helped push mortgage rates lower ahead of time. When the Fed delivered what everyone expected, there was no new reason for traders to keep pushing rates lower.

Instead, many took the opportunity to lock in profits from the recent rally, which nudged rates a bit higher. It’s the old saying at work: “Buy the rumor, sell the news.”

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What the Fed Said Afterward

Chair Jerome Powell held a press conference after the announcement, and this is where sentiment shifted a bit.

He confirmed that the Fed is currently more focused on the job market than inflation, even though:

• Unemployment is still relatively low, around 4.2%
• Inflation is still running nearly a full percentage point above the Fed’s 2% target
• The economy overall is still growing

That combination puzzled some market watchers. Reporters pressed Powell on why the Fed is cutting rates if slower job growth is tied to immigration (something interest rate cuts won’t affect). Powell called the decision a “risk management cut” and said they are approaching things on a “meeting-by-meeting” basis.

While that was a reasonable answer, it didn’t come across as very confident. Traders heard caution rather than conviction, and markets responded by pulling back slightly.

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Where Things Go From Here

The market still expects two more rate cuts this year, but that outlook could change quickly if hiring picks up or inflation runs hotter than expected. The Fed clearly wants to keep its options open and avoid locking itself into a firm path.

In short, we got the cut that everyone expected, but nothing new enough to push mortgage rates lower. Rates dipped heading into the meeting and then bounced slightly once the news hit.

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What This Means for Buyers and Sellers

Mortgage rates are still near the lowest levels we’ve seen all year, but this week was a good reminder that the market moves on expectations, not headlines.

Getting pre-qualified in today’s market can provide a clearer picture of affordability and help secure a stronger position if the right home comes along while rates remain favorable.

If questions come up about what this means for a specific scenario, we’re always happy to talk it through.

The Department of Veterans Affairs (VA) has announced a temporary policy update allowing veterans to pay real estate agent commissions when purchasing a home. This change, effective August 10, 2024, aims to prevent VA buyers from being disadvantaged as new real estate rules take effect later this summer.

Key Updates:

• Effective Date: The policy takes effect on August 10, 2024.
• Previous Rule: Veterans could not pay buyer-agent commissions; sellers had to cover these costs.
• New Rule: Veterans can now pay their buyer’s agent directly, provided the fee is reasonable and customary for the market.
• Seller Option: Sellers can still choose to pay the buyer’s agent commission, which does not count against the VA’s 4% cap on seller concessions.

This change comes in response to a paradigm-shifting lawsuit and resulting settlement by the National Association of Realtors (NAR) in March 2024. The settlement, effective August 17, 2024, could make homebuyers responsible for their Realtor’s commission, potentially up to 3% of the home’s price. This could have posed a significant problem for veteran homebuyers under the old VA rules.

Understanding the New Guidance

The new guidance allows veterans using the VA home loan to pay their real estate agent directly, under certain conditions:

• Direct Payment: Veterans can now pay their buyer’s agent directly in areas where the seller’s agent can’t list the buyer-agent commission on the MLS.
• Loan Restrictions: The agent commission cannot be wrapped into the VA loan.
• Verification: Lenders must verify that veterans have enough cash to cover the agent commission, closing costs, and any down payment.
• Transparency: The buyer’s agent commission must appear on the Closing Disclosure and the sales contract.
• Appraisal Process: The sales contract, including the buyer’s commission charges, is part of the appraisal process and loan documentation.
• Seller Payment: Sellers can still pay the buyer’s agent, but it is not mandatory.

Future Guidance

The VA has labeled this rule change as temporary to address imminent market changes. The Loan Guaranty Program plans to develop permanent guidance about buyer-broker commissions in the coming months as the real estate market stabilizes and new practices emerge.

Given the uncertain impact of the NAR settlement, veterans are encouraged to act quickly while sellers are still paying buyer-agent commissions.