Does the Fed set mortgage rates?

Short answer: not directly. Here’s what actually moves the rate you’re quoted.

The Fed sets a short-term rate

The Federal Reserve sets a target for the federal funds rate — an overnight rate between banks. That influences credit cards and HELOCs more directly than it does 30-year mortgages.

Mortgage rates follow the bond market

Long-term fixed mortgage rates tend to move with longer-term bond yields and mortgage-backed securities, which react to inflation data, the economy and expectations about future Fed policy. Rates can move before — or opposite to — a Fed announcement.

Your rate is personal

Credit score, down payment, loan type, property type and points all affect the rate you’re offered. That’s why headline averages rarely match an individual quote.

What to do about it

Watch your full payment, not just the rate, and have a plan for if rates move. A rate-watch conversation now makes a future refinance decision simple.