Many believe the Federal Reserve controls mortgage rates — but that’s not entirely true. While the Fed influences short-term interest rates, mortgage rates are driven by the bond market.

The Federal Reserve sets the Federal Funds Rate, which affects short-term lending between banks. That directly impacts:
- HELOCs (Home Equity Line of Credit)
- Credit card interest rates
- Auto loans
- Commercial loan rates
 

But mortgage rates? That’s a different story.

The 10-Year Treasury Yield is a strong general indicator — but the real driver is the Mortgage-Backed Securities (MBS) market.
 

Mortgage rates move based on the demand for MBS. These securities are bundles of thousands of mortgages that are bought and sold by:
- Institutional investors
- Pension funds
- Hedge funds
- Government agencies
 

✅ When MBS demand is high, mortgage rates tend to fall.
❌ When demand is low, rates rise as investors seek higher returns.

Think of it like this:
If 1,000 mortgages are combined into one large investment product and sold as a mortgage-backed security, and the average return is 4%, it becomes attractive to large-scale investors.
 

It’s the buying and selling of these MBS each day that causes mortgage rates to rise or fall — not the Fed.

At Wain Capital, we track:
- MBS trading activity
- Bond market trends
- Treasury yields (2, 3, 5, 7, 10 & 30-year terms)
 

If you’re monitoring rates at home, the 10-Year Treasury Yield is your best reference point:
 

➡️ If it goes up, mortgage rates often rise
⬅️ If it drops, mortgage rates usually follow

Our team constantly analyzes the bond market to help you lock in the best possible rate for:
- Home purchases
- Refinances
- Investment properties