Their a long-held belief that the Fed sets consumer mortgage rates.
It’s reinforced by the media, namely working “journalists” that know little about how mortgages actually work.
So each time the Fed gets together and cuts rates, you might see an article about the “Fed cutting mortgage rates.”
Even worse, there are countless real estate agents and even loan officers and mortgage brokers (who should know better) who believe this.
The weird side effect is a marketing opportunity for those who originate mortgages, because once the Fed cuts rates, the phone will be ringing.
UWM CEO Calls Fed Rate Cut a “Great Marketing Piece”
The CEO of the nation’s top mortgage lender, United Wholesale Mortgage, recently cited this phenomenon in his September edition of 3Points.
Mat Ishbia pointed out that while the Fed doesn’t set mortgage rates, the thought that they do creates an opportunity for those who work in the industry.
Here’s what he said in the video:
“…Everyone thinks he’s [Jerome Powell] going to lower rates by 25 basis points September 17th and maybe even more right after.
What does that mean for us? Lower rates could potentially mean more mortgages.
But also, as we saw last year, him lowering the rates doesn’t necessarily tie directly to mortgage backed securities, which is what our rates are tied to.
But, directionally it’s positive. It’ll be a great marketing piece for all of us in the industry.
Rates dropping is an opportunity.”
In other words, Ishbia obviously knows and explains that mortgage rates are driven by MBS pricing, which is driven by long-term bond yields like the 10-year Treasury.
But he also knows your average American doesn’t understand the first bit about this and as such, when the Fed cuts, it’s going to get consumers to pick up the phone.
If and when they do reach out to a loan officer or mortgage broker, it’ll create an opportunity for a sales pitch.
And this can happen whether mortgage rates go up or down on the day of the Fed rate cut.
For the record, I looked at a dozen past Fed rate decisions and mortgage rates often went in the opposite direction.
That’s because, aside from the Fed NOT setting mortgage rates, any movement in mortgage rates related to any Fed projections, is already long since baked in.
The Fed is boring. They telegraph their monetary policy using “old data.” That’s why it’s never any great revelation when they release their FOMC statement.
Everyone knows it’s going to be a hike or a cut beforehand, and how much that hike or cut is going to be.
On the day, mortgage rates may go up or down based on other things happening that day.
Remember, mortgage rates can change daily, while the Fed only meets eight times per year.
Pay Attention to Mortgage Rates Now, Not During Fed Week
The takeaway here is that mortgage rates aren’t set by the Fed. And any movement related to expected Fed policy has already been priced in.
And that very Fed policy is driven by the underlying economic data, most recently the complete breakdown in the labor market (bad jobs reports and massive downward revisions).
The latest being the annual revision to total nonfarm employment for March 2025 a negative 911,000 jobs!
That’s why 30-year fixed mortgage rates are nearly the lowest they’ve been in about 52 weeks.
This also explains why the Fed cutting next week may have absolutely no impact on mortgage rates. Or worse, they could bounce higher on the news, just because…
So there’s an argument to apply for a mortgage this week if you’re in the money for a rate and term refinance, or currently shopping to buy a home.
Because next week mortgage rates could be worse if inflation happens to unexpectedly tick higher again.
To that end, it’s actually a great opportunity for a loan originator to explain how mortgage rates really work and impart that knowledge to prospective clients.
Namely, by clearing the air and setting the record straight on this myth once and for all.
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on X for hot takes.