What drives mortgage rates (and what doesn't)
Mortgage rates are driven by the 10-year Treasury yield + a "mortgage spread" (typically 1.5–2.5 percentage points). The Fed sets short-term rates, not directly the 10-year — but Fed policy expectations move the 10-year, which moves mortgages. Headline Fed rate moves often don't immediately move mortgage rates.
The 10-year Treasury reflects what bond markets expect for inflation and growth over the next decade. Mortgage rates sit above it because mortgages have prepayment risk (you can refinance if rates drop, leaving the lender stuck with a low-yield investment), so the spread compensates for that asymmetry.
Normal spread: 1.5–2.0%. In 2022–2024 the spread widened to 2.5–3.0% because of mortgage-backed-security demand softness. As of 2026 it has narrowed back toward 2.0–2.5%. If the spread normalizes further, mortgage rates could fall meaningfully even without 10-year movement.
What this means practically: don't time a purchase to a Fed meeting. Mortgage rates respond to inflation data (CPI, PPI) and employment data (the monthly jobs report) more than to the Fed's announcements. The decision you're trying to make is "buy now or wait?" — see the calculator on that, which models the math directly.