The central bank's announcements are an important factor in the direction of US mortgage rates – but far from the only one
Hopeful buyers and existing homeowners alike often anxiously hang on the Federal Reserve’s every word for some indication of where mortgage rates are headed in the coming months. But mortgage brokers say focusing too much on the central bank’s role in influencing rates could risk overplaying its importance compared to other factors sometimes overlooked by clients.
The Fed’s decisions impact mortgage rates indirectly, affecting the cost of borrowing across the economy and impacting investor expectations and bond yields, such as the 10-year US Treasury.
But mortgage rates are also shaped by a range of other forces – including inflation expectations, global economic conditions, and demand in the mortgage-backed securities market – that can amplify or offset the Fed’s impact.
That’s why setting too much store by the Fed’s decisions when it comes to moving ahead with a property purchase or holding off is unwise, Texas-based broker Hunter Bolling (pictured top) told Mortgage Professional America.
‘They heard the Fed cut rates, mortgage rates are falling out of the sky… It’s not true’
While brokers are often peppered with calls from clients in the immediate aftermath of a Fed decision about what it means for them and their homebuying intentions, Bolling said the mortgage community has a responsibility to highlight that the central bank’s moves aren’t the only factor they need to consider.
“We’re starting to shift our marketing on social media specifically to debunk these myths,” he said. “Consumers follow what happens on TikTok and believe what they see on TikTok is the dead, honest truth. We’ve got to do a better job on our end of putting the right information out there.
“The conversation comes up a lot: they heard rates dropped, the Fed cut rates, mortgage rates are falling out of the sky. It’s not true – but we have to educate.”
Federal Reserve issues #FOMC statement: https://t.co/hYZFy30qZ4
— Federal Reserve (@federalreserve) May 7, 2025
Buyers need only look at the spell at the end of last year for an example of how mortgage rates don’t always rise and fall in tandem with the Fed’s benchmark. Between mid-September and the middle of December, the Fed slashed its funds rate three times in a row by a total of 50 basis points – but the average 30-year fixed-rate mortgage in the US actually jumped from 6.09% on September 19 to 6.85% by December 26.
Could the mortgage industry do a better job educating clients on rates?
Explaining how the Fed is just one of a range of factors affecting the direction of mortgage rates, Bolling said, is something brokers and the mortgage industry as a whole needs to work on when it comes to client education.
“I feel like, overall, we don’t do a good enough job of explaining that, other than Facebook posting, ‘Hey, this isn’t what it means,’” he said. “It’s taking it to the next level and digging into it: Why doesn’t it mean that?”
Being able to effectively explain the various forces behind mortgage rates to clients, he said, is a solid way of cementing trust and keeping them coming back. “We have so many more referrals from past buyers sending us deals without realtors because they felt educated in the process every step of the way,” he said, “and they felt they could trust that.”
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