That marks a clear rise from February 2026, when the same rate had slipped to around 6%. With the Federal Reserve having already lowered its benchmark rate across 2024 and 2025, many buyers and homeowners hoping to refinance had expected relief that has not materialised. The persistence of high rates has weighed on the wider housing market and drawn the attention of President Donald Trump, who has pressed the Fed to cut borrowing costs further.
How Much Can the Fed Actually Influence Mortgage Rates?
The short answer, according to finance academics who study the market, is not much. The Fed directly affects the federal funds rate, a short-term rate that banks charge one another for overnight loans. Many people assume mortgage rates move in step with the central bank’s decisions, but in practice they are set chiefly by financial markets.
This is because 30-year mortgages are long-term assets. Investors who buy these loans, either directly or through mortgage-backed securities, base their decisions on what they expect inflation, economic growth, government borrowing and interest rates to look like years into the future.
Inflation is among the largest of those factors. Although it has fallen substantially from the peaks of 2022 and 2023, investors remain uncertain about when it will return to the Fed’s long-term target of 2%, particularly given elevated oil prices and the continuing conflict with Iran. When a lender originates a 30-year, fixed-rate mortgage, it commits capital for decades. If inflation proves higher than expected, the future payments the lender receives lose value in real terms, so investors demand higher yields to offset that risk. The greater the risk, the higher the yield.
Government borrowing is another important influence. The Congressional Budget Office, the independent fiscal scorekeeper, projects continuing large federal deficits and rising debt in the years ahead. It estimated that Trump’s tax and immigration bill, passed by the Republican-controlled Congress in 2025, will add US$3.4 trillion to federal deficits through 2034. Financing those deficits requires the Treasury to issue large amounts of debt, and as the supply of government bonds grows, investors may require higher yields to absorb it. Because Treasury yields serve as a benchmark across the economy, mortgage rates tend to track the yield on the 10-year Treasury note far more closely than they follow the federal funds rate.
Why a Refinancing Premium Is Keeping Rates Elevated
A further layer of complexity comes from mortgage-backed securities, the bundled loans sold to investors rather than held on a lender’s books. Those investors face risks that buyers of Treasury bonds do not, chief among them the borrower’s right to refinance when rates fall, to repay early, or to move and clear the loan ahead of schedule.
To compensate for this prepayment risk, investors generally demand a premium above Treasury yields when buying mortgage-backed securities. Otherwise they could be left with a return below what they anticipated. With rates currently high, the general expectation is that many homeowners will refinance once they are able to, which makes the refinance risk greater than usual. According to the Urban Institute’s Housing Finance Policy Center, this has kept the spread between 10-year Treasuries and mortgage rates wide compared with historical norms. Even if Treasury yields hold steady, a larger spread can keep mortgage rates higher than borrowers might anticipate.
Historical perspective is often missing from these discussions. Many Americans compare today’s rates with those of 2020 and 2021, when some borrowers secured 30-year mortgages below 3%. Those were among the lowest rates ever recorded in the country and a product of the Fed’s emergency measures during recession, rather than the norm. Throughout much of the 1990s and early 2000s, mortgage rates frequently ranged between 6% and 8%, which places current levels in a less unusual light.
