What Actually Moves Mortgage Rates? (It's Not the Fed)

Auto-generated captions cleaned for readability. Sponsor messages, commercial breaks, and repeated housekeeping have been trimmed; licensing information appears at the bottom of this page. This episode was sponsored by Vera Nelson of Hythe Realty, Pasadena.

The Fed hasn't moved — so why are rates up?

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom, and today we're talking about what actually moves interest rates. You've heard me say it for years: the Fed does not necessarily move mortgage rates. Today I want to explain, in more depth, exactly how we get the rates we get — and what could change on Friday.

The Fed has not moved one time this year. In all of 2026 — and it's already August 26 — we've had no rate cut and no rate hike. The Fed has kept everything stable. And yet interest rates are up significantly from January.

That's because mortgage rates are not directly connected to the Federal Reserve prime rate. Short-term debt is: car loans, home equity lines of credit, credit cards. Those are the Fed funds rate plus a margin. If the Fed funds rate is at 3.5–3.75% and your home equity line carries a margin of three, you're paying around 6.75%. Credit cards might carry a margin of 15% on top. When the Fed moves, those move. Mortgages don't work that way.

Q&A: first-time buyer programs when one of you already owns

Rachel asks: “I just bought a house last week. My fiancé wants to buy a house next year. Could he still take advantage of first-time home buyer benefits if we buy together, or should he buy alone?”

Great question. If he buys alone, yes, he can use first-time buyer programs. Most of them require that everyone on the loan is a first-time buyer — so if you go on the loan and you already own a home, you'd be ineligible for the majority of them. There are some you could still use, but not most.

But here's what matters: low down payments don't require first-timer status. If you co-sign together, an FHA loan is 3.5% down, or a conventional loan on a primary residence is 5% down. Anyone watching this — if you're buying a primary residence you're going to occupy, even if you own another home, you can still get in with primary-residence down payments.

Rachel says her current loan is FHA. A lot of people believe you can only have one FHA loan at a time — that's inaccurate. You can have more than one, but you have to show FHA a reason you need another: getting married, a growing family, needing a bigger place — that would qualify you to keep your current home and buy another at the same low down payment.

One caveat: if your current home is FHA and your plan is to rent it out and buy the new home FHA, we cannot use that rental income toward your qualifying income — your incomes alone need to carry both mortgage payments. The only time FHA lets us count rental income on a departing residence is when you're moving at least 100 miles away. FHA treats that as a relocation where you have no choice but to move.

Mortgage rates follow the 10-year Treasury

So what are mortgage rates actually connected to? The 10-year Treasury yield. The bond market moves just like the stock market — reacting to news and announcements that can move the needle quickly.

The Fed funds rate is what banks charge each other overnight. It moves credit cards, home equity lines, and auto loans fairly directly. But a 30-year fixed mortgage is a 30-year bet. It tracks the 10-year yield because that's the closest thing the market has to a benchmark for long-term lending, and mortgage bonds have to compete with Treasuries for the same investor dollars.

Where do we stand? The 10-year Treasury is at 4.66% as of today, August 26 — up from 4.2% at the start of the year, without the Fed moving once. The number people think drives mortgage rates — the Fed funds rate — sat still the whole time.

August 17: the global bond sell-off

On August 17, the 30-year Treasury yield went above 5.31%. It was a very swift, fast jolt — the highest level we've seen since 2007. I'll tell you, it was scary. And it wasn't only America: Japan's 10-year hit a 30-year high, and Germany's 30-year hit its highest since 2011. It was a global bond sell-off.

What created it? Inflation hasn't settled. The sheer scale of government borrowing is off the charts. Corporate debt issued to fund AI buildouts hit the news. Oil prices were elevated. Everything came at us at once, and the 10-year went through the roof.

So on August 19, the Treasury Department said it would double the size of its debt repurchases — essentially, “we're going to start buying back the bonds we've been selling.” Yields dipped on that news… then rebounded. Everything we gained on August 19 was erased. That is a really important detail: news moves the market. Some news spikes us, some news drops us, and it can be very, very quick.

Why rate sheets change mid-day

When a loan officer says “I can't guarantee this rate until it's locked — you're subject to the most recent rate sheet,” understand what that means. Some days we get one rate sheet; some days we get three, depending on what's moving the bond market. If you don't lock, you're subject to the newest sheet.

I have feelings for the loan officers who tell you this, because many people assume it's a way to quote one rate and switch you later. It is truly out of their control. We don't control the rate sheets — we just get an email: worsening prices, check new rate sheet. Improving prices. On August 19, that Treasury announcement actually gave us an improving-prices rate sheet — for a day. Your loan officer isn't baiting you; they're preparing you to make a decision: lock now, or float with the market. It's 100% your choice.

Friday at Jackson Hole: Warsh's first keynote as chair

So why is Friday a big day? Fed Chair Kevin Warsh delivers his first-ever Jackson Hole keynote as chair this Friday, August 28 — three weeks before the next Fed meeting.

A new chair's first major address is where the market forms its view of how that person will behave for years, not just the next meeting. After the July meeting — his first — he gave very little forward guidance. He was very difficult to read, and I said so on the show at the time. Investors read that as a lack of resolve on inflation, and long-term yields climbed to a two-decade high in the weeks that followed.

Here's the line I wrote down to make sure I said on air: mortgage rates embed the market's expectation for the entire future path of policy. A speech that shifts the 2027 outlook can move a mortgage rate today, with no policy change at all. That's exactly what we've watched all year: the Fed hasn't moved the funds rate once, and yet we're up dramatically from January.

Stop waiting for 5%

Markets right now are pricing roughly one-in-three odds of a September rate hike — not a cut. Anyone sitting on the sidelines waiting for cheap money to return should hear that plainly.

If you've been waiting for a 5% rate to buy your first home, or waiting for 5% to refinance when you've got debt coming out your ears or you need a roof — you cannot keep everything on hold waiting for rates that aren't forecast. I'll read exactly what I wrote this morning: stop waiting for the Fed. Every major forecaster currently has the 30-year fixed staying above 6% through the rest of 2026 and most of 2027. A strategy built on waiting for a 5% handle is a strategy built on a forecast nobody is making.

You cannot time the market. Do what you need to do, and make sure you're comfortable with what you sign up for — the payment at today's rate. If rates improve, we can always refinance and drop it. But sign up for something you're prepared to hold for a very long time.

My own view — the Mortgage Mom forecast, no crystal ball: I think the forecasters are pretty correct this time. Toward the end of 2027 we might see rates dip into the high fives, but I think we're above 6% for at least the next 12 months.

Lock or float?

If you're in escrow right now and haven't locked: knowing Friday could be volatile, I recommend you call your loan officer and lock in your rate. I know it's scary — locking means that if rates improve a little, you don't get the benefit. But it's a warranty: if rates get worse, yours can't go higher. You have to decide what you're comfortable with.

If it were me, I'd be calling the Mortgage Mom team and asking about locking with a float-down option. We have programs where you lock — protected if rates rise — but with a float-down feature: if the market improves by a significant amount (not a tiny move), we can offer you the lower rate. You've got today and tomorrow to get that done before Friday.

If you're a buyer just getting started: rates are where they're going to stay, probably for at least a year. So negotiate with the seller for concessions to buy your interest rate down — not with your money, with the seller's money. We can plan exactly how much that saves on your monthly payment before you make the offer.

And one more time, because it matters: real estate is for the long haul. Do not stretch into a payment you can barely afford on the theory that you'll hold on just long enough to refinance. I don't want that in your vocabulary. If the home you love is outside the budget, we talk before the offer about how the seller can help make that payment comfortable — not about you white-knuckling it.

This week's numbers

Remember: rates depend on your FICO score, the property type — condo, single family, 2-to-4 unit, manufactured — and your loan balance. Above the conforming limits you're into high-balance pricing, which is different again. These are averages for context, not a quote.

The Freddie Mac 30-year fixed is hovering around 6.65% as of August 20 — the second straight weekly decline, though a minuscule one: 6.70 the week before, 6.72 before that. That's the usual pattern: a big spike, days of worse-worse-worse, then a settle. We're in the settle until we see what happens Friday. A year ago the 30-year was 6.58, so we're seven basis points above last August — and our best rates in recent memory were around October–November 2025.

The 15-year fixed is about 5.95%. A 30-year refinance averages 7.15% — purchase, refinance, and cash-out each price differently, which is why I break these out. VA 30-year is around 6.25% on average, and it moves with origination fees — for my vets, I charge no origination, processing, underwriting, or funding fees, where a $3,500 flat fee is common in the industry, so compare the whole package, not just the rate. The 10-year Treasury is at 4.66%, and the Fed funds target is 3.5–3.75%, unchanged all year. Next week's show will have all the post-Jackson-Hole nitty-gritty.

Q&A: buying at 25

Ethan asks: “Is it smart in this market to buy at the age of 25?”

Yes. I have a lot of people who decided to wait, starting back in 2020 — and they were still waiting in 2023, 2024, 2025, while property values did nothing but appreciate. Now in 2026, values are up and rates are elevated. Every real estate market has a cycle: values go up, values come down, and over time each cycle ends higher than the last.

What I want a 25-year-old to think about: pretend you're buying at the top of the market. Buy a comfortable payment you know you can carry for at least five years, somewhere you can genuinely stay. And I'll bet you anything that within five years — even buying in 2026 with elevated rates and prices — you'll be calling me to buy another property. That first home is the stepping stone: never sell it. It becomes part of your portfolio and your retirement down the road.

Wrap-up

If you want to know when I go live, text the word LIVE to 844-935-3634 — one text a week with the topic and a link to join, no spam. That's also the office number if you'd like to talk with me or the team. At mortgagemomradio.com you'll find the calculators, the weekly newsletter, the podcast archive, and a way to submit questions for the next live show. I'll be back next Wednesday at 3 PM on YouTube and Facebook. Talk to you all real soon.