{"id":55128,"date":"2026-03-18T15:27:36","date_gmt":"2026-03-18T15:27:36","guid":{"rendered":"https:\/\/diyhaven858.wasmer.app\/index.php\/how-does-the-fed-decision-affect-mortgage-rates\/"},"modified":"2026-03-18T15:27:36","modified_gmt":"2026-03-18T15:27:36","slug":"how-does-the-fed-decision-affect-mortgage-rates","status":"publish","type":"post","link":"https:\/\/diyhaven858.wasmer.app\/index.php\/how-does-the-fed-decision-affect-mortgage-rates\/","title":{"rendered":"How does the Fed decision affect mortgage rates?"},"content":{"rendered":"<p> <br \/>\n<\/p>\n<div>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The Federal Reserve, also known as \u201cthe Fed,\u201d is the central bank of the U.S. and plays a significant role in shaping the nation\u2019s monetary policy. One of its key functions is setting interest rates.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Those rates determine how much Americans earn on their savings and how much they pay to borrow \u2014 including when buying a home. The Fed indirectly impacts mortgage rates by setting what\u2019s called the federal funds rate, and that rate impacts a wide variety of financial products, including home loans.<!-- HTML_TAG_END --><\/p>\n<p> <iframe loading=\"lazy\" title=\"CDS Widget\" src=\"https:\/\/templates.cds.yahoo.com\/remote\/widget?campaignId=4ec2331a-fbb0-4230-81e2-d38f75a95135&amp;lineItemId=58b163d6-ba90-4126-bd53-495e20aa96b0&amp;contentId=b054d2e5-e4f8-4e62-8da2-0ff89480d487&amp;viewId=M2P8mHLvmKen1QiAoNm97Q&amp;providerId=yahoo_personal_finance_397&amp;site=finance&amp;spaceId=1183300100&amp;commerceSiteId=us-finance-pnr&amp;url=https%3A%2F%2Ffinance.yahoo.com%2Fpersonal-finance%2Fmortgages%2Farticle%2Fhow-does-the-fed-decision-affect-mortgage-rates-203137727.html\" scrolling=\"no\" height=\"480\" data-testid=\"iframe-with-resizer\" class=\"yf-16wd5dt\"><\/iframe> <\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->To understand how the Federal Reserve works, think of the U.S. economy as a farm and the Fed as a farmer in charge of water, representing money and credit. \u201cOur farmer wants enough water flowing into the farm so that the crops grow. Think of that like job creation and economic growth,\u201d Corbin Grillo, a certified financial analyst with Linscomb Wealth, said via email.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->If the farmer (the Fed) leaves the faucet on full blast, the crops will flood, causing inflation. If the farmer doesn\u2019t water the crops enough, they\u2019ll wither, causing a recession.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The Fed\u2019s job is to continuously make decisions that keep the right amount of water (money and credit) flowing so that its crops (the U.S. economy) grow and thrive.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->To control the flow of water (money and credit), the Fed sets the federal funds rate, a benchmark interest rate that affects multiple parts of the economy. Consumers can see the impacts of the fed funds rate on products, ranging from savings accounts to mortgage rates.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Although the federal funds rate doesn\u2019t directly affect mortgage interest rates as much as savings or personal loan rates, it does have an influence. (More on that later.)<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->If the economy is dry \u2014 that is, if people aren\u2019t spending money \u2014 the Fed adds more water by lowering the fed fund rate to encourage people to spend. Low interest rates make borrowing money less expensive, so people tend to spend more freely and use credit to make larger purchases.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->However, if the economy starts to flood because people are spending too much, the Fed dials back the water to keep the crops (economy) alive by increasing the fed funds rate. Higher interest rates encourage people to save instead of spend because borrowing money is expensive.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->While the federal funds rate had been at a 23-year high since July 2023, the Fed finally lowered it at its meetings in September, November, and December 2024.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The central bank left the rate unchanged at its first five 2025 meetings before finally cutting it by 25 basis points at its September meeting, then by another 25 bps at both its October and December meetings.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->However, the Fed has left its rate unchanged so far in 2026.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Remember how we said that the Fed doesn\u2019t directly set mortgage rates? It\u2019s true. However, the fed funds rate impacts the yield on the 10-year Treasury note, which directly affects what consumers pay when they borrow money, said Kevin Khang, head of global economic research with Vanguard, in a phone interview.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->\u201c[The] 10-year rate, the yield on that note, is kind of like the absolute minimum people should expect to pay when they borrow,\u201d Khang said. \u201cIt serves as a benchmark, and everyone else should expect to pay a little more.\u201d Why more? The middlemen. \u201cLenders have to get compensated for taking on the credit risk for homeowners.\u201d<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->So, let\u2019s look at how the 10-year Treasury and mortgage rates have moved together in the past few years. In May 2020, the fed fund rate dropped to 0.05%, and the 10-year Treasury yield was roughly 0.64%. The average rate on a 30-year fixed-rate mortgage at the time was 3.28%. Now, let\u2019s look at the last six months or so.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Inflation meant that the Fed needed to dial back the water, so it raised the federal funds rate. By early August 2024 (before the Fed finally cut the rate in September), the 10-year Treasury yield was 3.99%, and the 30-year fixed rate was 6.73%.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->As of March 2026, the effective fed funds rate was 3.64%, and the 10-year Treasury was 4.23%. According to Freddie Mac, the average 30-year fixed mortgage rate was 6.11%.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The 10-year Treasury yield and mortgage rates tend to increase when the federal funds rate increases. However, the inverse is also true.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Usually, the simple answer is yes \u2014 mortgage rates tend to go down when the Fed cuts interest rates. Or rather, mortgage rates typically decrease before an anticipated Fed rate cut.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->However, right now, the answer is: It depends. There&#8217;s a lot going on in the U.S. economy that impacts mortgage rates other than the Fed rate, including the Middle East conflict. Investors&#8217; assessments about what Trump is doing in office are affecting the 10-year Treasury yield, and Trump and the Federal Reserve have a complicated relationship.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->A lot is up in the air about how the latest and future Fed rate cuts will impact mortgage interest rates.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Now that you understand the connection between Fed rates and mortgage rates, what should you do with this information? Here are some ideas to consider as you look to purchase or refinance a home in today\u2019s economy.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->\u201cWe generally wouldn\u2019t recommend consumers spend much time worrying about things that are out of their control,\u201d said Grillo. Since you have no impact on the federal funds rate or the 10-year Treasury yield, it\u2019s better to focus on things in the mortgage process under your control.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Comparing mortgage lenders, interest rates, and closing costs can help you find the best possible product for your credit score, market, and financial situation.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Over the past few years, adjustable-rate mortgages have fallen out of favor as interest rates climbed. Now, these mortgages could help first-time buyers and those refinancing ride an anticipated wave of declining interest rates. Popular mortgages for first-time buyers, like VA and FHA loans, offer adjustable-rate products.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->While there\u2019s no guarantee that mortgage rates will decrease, you may want to consider an adjustable-rate loan. A conversation with a mortgage professional can help you understand your options.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->If you value consistency and predictability, you may be better off with a fixed-rate mortgage if rates trend downward. With the Fed\u2019s conservative outlook on cutting rates, how long should you wait before locking in a mortgage rate? Khang said the decision is personal and depends on your needs and finances. If you need to move, you may take today\u2019s best rate and hope to refinance into a lower rate later.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->Others may have more flexibility. Khang said that those who don\u2019t need to buy now may want to hold out for at least a year now that the Fed has started cutting rates. \u201cFinanciers can take some time to adjust their spread [between the 10-year Treasury and mortgage rates],\u201d Khang said. \u201cSo, it can take some time for lenders to catch up with lower rates.\u201d<!-- HTML_TAG_END --><\/p>\n<p> <iframe loading=\"lazy\" title=\"CDS Widget\" src=\"https:\/\/templates.cds.yahoo.com\/remote\/widget?campaignId=4ec2331a-fbb0-4230-81e2-d38f75a95135&amp;lineItemId=58b163d6-ba90-4126-bd53-495e20aa96b0&amp;contentId=b054d2e5-e4f8-4e62-8da2-0ff89480d487&amp;viewId=M2P8mHLvmKen1QiAoNm97Q&amp;providerId=yahoo_personal_finance_397&amp;site=finance&amp;spaceId=1183300100&amp;commerceSiteId=us-finance-pnr&amp;url=https%3A%2F%2Ffinance.yahoo.com%2Fpersonal-finance%2Fmortgages%2Farticle%2Fhow-does-the-fed-decision-affect-mortgage-rates-203137727.html\" scrolling=\"no\" height=\"480\" data-testid=\"iframe-with-resizer\" class=\"yf-16wd5dt\"><\/iframe> <\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The Federal Reserve sets the federal funds rate. That rate influences the yield on the 10-year Treasury note, which serves as the index for most mortgage rates in the U.S. As the fed funds rate increases and decreases, so does the yield on the 10-year Treasury; mortgage rates tend to follow the same trends.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->If interest rates drop, your mortgage payment may go down if you have an adjustable-rate mortgage. However, if your current mortgage is a fixed-rate product, your interest rate remains the same for the life of your loan unless you refinance to a loan with a lower rate.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START -->The Federal Reserve tends to have the most control over housing interest rates in the U.S. It sets the federal funds rate, which influences rates on various products, including government securities, savings accounts, and loans. As the fed funds rate rises and falls, so do mortgage rates.<!-- HTML_TAG_END --><\/p>\n<p class=\"yf-1fy9kyt\"><!-- HTML_TAG_START --><em>Laura Grace Tarpley<\/em><em> edited this article.<\/em><!-- HTML_TAG_END --><\/p>\n<\/p><\/div>\n<p><br \/>\n<br \/><a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Federal Reserve, also known as \u201cthe Fed,\u201d is the central bank of the U.S. and plays a significant role in shaping the nation\u2019s monetary policy. One of its key functions is setting interest rates. Those rates determine how much Americans earn on their savings and how much they pay to borrow \u2014 including when [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":55134,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[10],"tags":[170,57,55,99,62,20,1758],"class_list":["post-55128","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-news","tag-fed-fund-rate","tag-federal-funds-rate","tag-federal-reserve","tag-home-loans","tag-interest-rates","tag-mortgage-rates","tag-personal-loan-rates"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/diyhaven858.wasmer.app\/wp-content\/uploads\/2026\/03\/86303ac0-58b4-11ef-bfb7-184e038fa70c.jpeg","jetpack_sharing_enabled":true,"jetpack-related-posts":[],"_links":{"self":[{"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/posts\/55128","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/comments?post=55128"}],"version-history":[{"count":0,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/posts\/55128\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/media\/55134"}],"wp:attachment":[{"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/media?parent=55128"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/categories?post=55128"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/diyhaven858.wasmer.app\/index.php\/wp-json\/wp\/v2\/tags?post=55128"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}