Why mortgage rates follow the 10-year Treasury, not the Fed
The short answer
Thirty-year mortgage rates track the 10-year Treasury yield more closely than the Federal Reserve's short-term rate, because most mortgages are paid off or refinanced within about 10 years and are funded by investors who compare them with Treasuries. The mortgage rate is roughly the 10-year yield plus a spread that covers risk and costs; historically that spread has averaged a little under 2 percentage points.
The simple version
Lenders do not keep most mortgages. They sell them to investors, mostly through mortgage-backed securities guaranteed by Fannie Mae, Freddie Mac, or Ginnie Mae. Those investors could buy a U.S. Treasury instead, so they demand a higher yield for the extra risks of a mortgage, especially the risk that borrowers pay off early when rates fall.
Mortgage rate = 10-year Treasury yield + spread.
Why the spread matters
From 2022 through 2024 the spread was unusually wide, often well above its long-run average, which made mortgages more expensive than Treasury yields alone would suggest. By September 2026 market analysts reported that the spread had narrowed back close to its 20-year norm. That is good news in one way, but it means there is less cushion: when Treasury yields rise, mortgage rates now rise nearly one-for-one.
What moves the 10-year yield
- Inflation. Higher expected inflation pushes yields up.
- Economic strength. Strong jobs and growth data tend to lift yields.
- Fed expectations. Markets price in expected Fed moves in advance, which is why mortgage rates often move before a Fed meeting, not after.
- Government borrowing and global demand for U.S. debt.
How to use this as a borrower
You do not need to watch bond markets daily. But if you are under contract and hear that inflation or jobs reports came in hot, rates may rise over the next few days, which is a reason to talk to your loan officer about locking. And remember that your own rate depends heavily on your credit score, down payment, and loan type, which you can control.
Common questions
Do mortgage rates change every day?
Yes. Lenders reprice daily, and sometimes during the day, based on mortgage bond prices. Weekly surveys like Freddie Mac's show the average.
If the Fed cuts rates, will mortgage rates fall?
Not necessarily. If markets already expected the cut, mortgage rates may not move, and they can even rise if investors worry about inflation.