Why mortgage rates are still heading higher

CNN reports:

The Federal Reserve cut interest rates by three-quarters of a percentage point Tuesday, but don't expect mortgage rates to go down too. In fact, home loans could be heading higher.

Consider recent history: The Fed issued an emergency cut of short-term rates in early January, and then trimmed more just a few days later - but the 30-year fixed mortgage rate has responded by bouncing up from 5.6% to 6.4%.

The Fed's main tool is control over the short-term fed funds rate, which determines what banks charge each other for overnight loans. Long-term mortgage rates are mostly tied to the 10-year Treasury yield, which is determined by bond traders worldwide.

"There is a long disconnect between the fed funds rate and fixed mortgage rates," said Keith Gumbinger, vice president of mortgage and consumer loan information publisher HSH.com.