A Federal Reserve Bank of St. Louis Page One Economics article published October 1, 2026, explains why mortgage rates do not simply track the federal funds rate. That rate is a short-term, overnight benchmark; mortgage pricing is influenced by conditions and expectations in longer-term markets.
A useful way to think about mortgage pricing
A simplified relationship is:
Mortgage rate ≈ 10-year Treasury yield + mortgage spread
The 10-year Treasury yield is a benchmark for 30-year mortgage pricing. Although mortgage terms commonly run 15 to 30 years, many loans are repaid, refinanced, or ended when a home is sold before the full term. This makes a 10-year yield a useful reference, not a direct match or a guarantee of where mortgage rates will be.
What the mortgage spread represents
Mortgage-backed securities compete with Treasuries for investors, and they carry additional risks. Investors therefore require an extra yield. The mortgage spread also reflects factors such as loan origination costs, servicing fees, and lender profit.
How monetary policy can matter
Federal Reserve policy can influence longer-term yields through market expectations and through purchases of Treasury securities or mortgage-backed securities. But the federal funds rate and mortgage rates are not interchangeable: expectations about future rates, inflation, and economic conditions also affect longer-term markets. If inflation expectations or uncertainty rise, long-term mortgage rates can remain elevated even when short-term policy rates move differently.
This framework is general market education, not a forecast of mortgage rates. For more foundational material, visit Quantvize Education.
Source: Federal Reserve Bank of St. Louis, Page One Economics, “What Determines Mortgage Rates?” (October 1, 2026).
Source: St. Louis Fed Page One Economics (published 2026-10-01 15:00 UTC).
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