The mortgage rates have been dropping in the past few weeks in anticipation of the Fed cutting their rate, which they did on Tuesday by 0.25 percentage points. However, with the rate cut, the 2025 projection caused some skepticism within the market. The rate cut was only a small portion of the announcement, with more emphasis being placed on the prediction of Fed rates for 2025. 

All Fed members voice their predictions using a Dot Plot which all indicated a rise from previous predictions. Mortgage rates are based on the economy, inflation, the 10-year Treasury yield, among other factors. Some of these same economic conditions are used by the Fed to determine whether the Fed rate will cut or spike. The predictions by the Fed for 2025 impacted the mortgage rate as witnessed in the spike over the last couple of days.

It is important to understand that the mortgage rates are anticiapatory of the Fed rates and are also impacted by Treasury yields, which also spiked as the announcement was released.