As it turns out, the expensive gadget you (probably) bought to measure your body fat percentage doesn’t actually work that well. Consumer grade methods of measuring body fat percentage are not precise or accurate enough to be reliable measures of weight or fat loss. Not only that, but they are not even consistent in how far off from accurate they are. You should especially not trust any device that measures via bio-electrical impedance. A multitude of factors that cannot be controlled outside of a clinical environment can mean your actual body fat percentage is 5% (or more) greater or less than the number you get. Just because you see 20.7% one day and 21.4% the next doesn’t mean you actually gained 0.7% bodyfat in a day.
You’ll unfortunately just have to trust the trend you see on the scale and know without being able to measure it directly that you’re losing fat. Unless you have a serious and rare medical issue, if you’re losing weight, you can’t not be losing fat too. If you want to maximize your results and look your best when you get down to a lower weight, you should make sure to do resistance training to help spare your muscle (and possibly gain a little as well) as you lose weight.