The Fed Cut Rates—Will DSCR Pricing Fall Next?

The Fed lowered the federal funds rate by 0.25% today to a 3.50%–3.75% target range. It’s the third cut since September and, yes, markets were watching closely. Financial Times+1

But here’s the part that matters for investors: DSCR and mortgage pricing don’t move 1:1 with the Fed’s overnight rate. They lean much more on the 10-year Treasury yield and on MBS/credit spreads—which often adjust before the Fed meeting as traders price in expectations. Freddie Mac+1

Fed funds vs. the 10-year (plain English)

  • Fed funds rate: the overnight rate banks charge one another. It’s the tool the Fed sets; it mainly steers short-term money. Federal Reserve

  • 10-year Treasury yield: a market-set long-term rate reflecting growth/inflation expectations and risk appetite. Mortgage rates—and most investor loan rate sheets—tend to track it (plus a risk/spread premium). Freddie Mac

That’s why you sometimes see this: the Fed cuts, but mortgage/DSCR quotes don’t drop—or even rise—if the 10-year or spreads move the other way. (Freddie Mac’s research shows a strong, long-running link between the 30-yr mortgage rate and the 10-yr Treasury, but not a perfect lockstep.) Freddie Mac

So…what should DSCR borrowers expect?

  • If the 10-year eases and spreads cooperate, DSCR pricing can drift lower near-term. If the 10-year backs up on a hot CPI/jobs print or wider spreads, gains can vanish quickly. Freddie Mac

  • Part of today’s cut was already priced in. Futures (CME FedWatch) handicap policy shifts ahead of time, so lenders often adjust before the press conference. CME Group

  • Day-to-day volatility remains. The 10-yr/mortgage spread has been unusually wide at times this year; when it narrows, rate sheets improve without any Fed move—and vice versa. Wolf Street

Action steps for investors (no-regret moves)

  1. Price it now, not theoretically. Ask for a same-day scenario at current sheets. Use a +25–50 bps stress test to see if your DSCR still pencils.

  2. Lock with a plan. Consider a lock + conditional float-down if available.

  3. Model a permanent buydown. If you’ll hold past break-even months, points can raise DSCR and lower payment without waiting on the next meeting.

  4. Know your exit. If you’re flipping/building, remember our no-prepay rehab and GUC funding at 7.99% with DSCR take-outs from 5.88% when you stabilize. (Exact pricing subject to file and markets.)

  5. Watch the right benchmark. Track the 10-year and mortgage surveys (e.g., Freddie Mac PMMS) for directional clues—not just the Fed headlines. Freddie Mac

Quick glossary (client-friendly)

  • Fed funds rate: overnight interbank rate the Fed targets. Not your mortgage rate. Federal Reserve

  • 10-year Treasury: market yield that anchors many long-term loans and MBS pricing. Freddie Mac

  • Spread: extra yield investors require for mortgages vs. Treasuries (credit, prepayment, liquidity risk). When spreads tighten, borrower rates improve—even if the Fed does nothing. First American Blog

Want a same-day DSCR quote at today’s levels? Send the address, rents (or market), taxes/ins/HOA, target LTV, and hold period. We’ll return side-by-side scenarios (with/without buydown) and a lock strategy aligned to the 10-year, not just the news cycle.