The Federal Reserve's Open Market Committee (FOMC) is expected to leave interest rates unchanged this week. While mortgage rates often anticipate a Fed rate move, rising or falling well before the FOMC announces its decision, rates have found another motivator: President Trump.

When the Fed goes into its "wait and see" mode, as it is now, mortgage rates look for a catalyst elsewhere. Current Fed funds futures, as measured by the CME Group, expect a quarter-point rate cut no sooner than June. But mortgage rates have done anything but wait.

In a Jan. 21 analysis, Joel Kan, vice president and deputy chief economist of the Mortgage Bankers Association, noted recent lower home loan rates.

“Mortgage rates declined further last week, driving another big week for refinance applications, which saw the strongest level of activity since September 2025," Kan said. Loan applications, as measured by the MBA composite index, increased by over 14% from the previous week, and refinancing rose by 20% over the same one-week period. Refinances were 183% higher than the same week one year ago.

On Thursday, Jan. 22, Freddie Mac reported that 30-year fixed-rate loans increased by only three basis points from the three-year low of 6.06% reported just last week.

Without a Fed rate cut in sight, what moved rates over the past two weeks? It was President Trump announcing potential housing affordability initiatives.

Learn more about how the president can affect mortgage rates.

The Trump White House has been pumping out home affordability ideas at a surprising rate:

First, on Jan. 7, the president ordered a ban on institutional investment in single-family housing. The executive order aims to allow more first-time home buyers into the market.

The next day, the president announced that he wanted Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds, in an effort to compel lower mortgage rates.

Then, on Jan. 16, the administration teased a broad concept, without providing details, that might allow 401(k) participants to use their retirement savings to fund a down payment on a home.

The result? Since the initiatives were announced beginning on Jan. 7, 30-year mortgage rates dropped from 6.16% to 6.06% — before rebounding to 6.09%.

Lately, some lenders have been offering sub-6% mortgage rates, according to a Yahoo Finance survey of lenders with the best rates this week.

Still, the Federal Reserve has a role to play in influencing 2026 mortgage rates. The Fed is generally expected to make one, possibly two, interest rate cuts this year. However, there are some doubts on Wall Street.

"If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year," Michael Feroli, chief U.S. economist at J.P. Morgan, said in a research note on Jan. 16.

Yet, J.P. Morgan expects inflation to continue gradually declining and the labor market to tighten by the second quarter of 2026. With that, the firm is predicting the next quarter-point move to be a rate hike in the third quarter of 2027.

With the prospect of a new Fed Chairman being named this year when Jerome Powell's term ends in May, predicting future Fed rate moves may become even more difficult.

How does inflation impact mortgage interest rates?

With the next Fed meeting this week, and the FOMC expected to stand pat at least until June, what will happen with mortgage rates?

LoanDepot’s head economist Jeff DerGurahian doesn't expect any "sustainable" moves downward for mortgage rates in the short term. He's watching 10-year Treasury yields to see if they continue to settle in the 4.2% to 4.3% range.

"The rate improvements seen last week following the administration's $200 billion mortgage-bond purchase announcement could be undone if Treasury yields continue to drift higher within this new range," he told Yahoo Finance.

DerGurahian will also look for a "shift in the Fed's tone indicating greater confidence that inflation is firmly trending toward its target" at this week's Fed meeting.

Laura Grace Tarpley edited this article.

The FOMC once again lowered the federal funds rate on Dec. 10. It was the third and final rate cut of 2025. Wall Street traders aren't looking for another until early summer and again perhaps in fall of 2026.

The federal funds rate. The Fed. The FOMC. No doubt you've heard and read these terms before. But what do they mean? How does this impact your financial life?

The federal funds rate is the interest rate the government sets for one bank to charge another bank for ultra-short-term loans, usually just overnight. It's actually an interest rate range. Banks negotiate a specific rate between each other within that range set by the Federal Reserve.

How much control does the president have over the Fed and interest rates?

The current federal funds rate is 3.50% to 3.75%.

The history of fed funds rate increases and declines over the past five years looks like a small mountain with a steep ascent, a flat peak, and a gentle decline.

After years of interest rates at zero, the Fed began raising the fed funds target in March 2022. After 11 rate hikes, some of them jumbo increases of 0.75%, the Fed settled at 5.25% in July 2023.

The fed funds rate held firm until Sept. 2024, when the Fed reversed course and initiated the first half-point cut. After two more quarter-point decreases, by December, the federal funds rate was frozen at 4.25% until Sept. 2025, when the Fed launched the first of three rate cuts for the year.

Want more context? Here are some additional details.

The federal government used to require banks to hold a certain percentage of their deposits in cash as a reserve. That ended in 2020.

When banks were required to have reserves, those funds were held in the U.S. Federal Reserve System, often called "the central bank" or just "the Fed." There are 12 Federal Reserve banks across the nation.

Today, banks still hold money at the Fed, but for a different reason: to manage the flow of enormous sums of cash day to day. For example, when a bank moves a great deal of money and needs some extra liquidity, it can borrow the cash from another financial institution through the Federal Reserve System.

Now, here's why all of this matters to those of us who aren't bankers.

Learn how the federal funds rate has changed over the last 50 years

The U.S. central bank — the Federal Reserve — has a committee that meets eight times a year to set the target range that banks will use to borrow from each other. It's called the Federal Open Market Committee.

At these meetings, the FOMC decides whether to raise, lower, or keep that interest rate the same.

Even a rate pause makes financial news headlines.

The Fed makes these interest rate decisions to adjust the U.S. economy and manage consumer costs. Higher prices on groceries, gas, and most everything else is called inflation.

By raising interest rates, the Fed makes borrowing money more expensive. As a result, the economy is expected to slow, and with it, the inflation rate will ease.

If the economy needs a boost, the Fed decreases interest rates.

If the economic outlook is unclear, the Fed waits.

Learn how inflation affects mortgage rates.

Those interest rate changes at the very top rung of the financial pyramid trickle all the way down through the banking industry. Since banks pay interest to borrow from each other, they use that baseline cost to set their interest rates for consumers.

Everything is impacted:

Interest paid on savings and money market accounts

Interest paid on high-yield savings accounts

Interest paid on certificates of deposit

Interest charged on credit cards

Interest charged on loans, such as student and auto loans

The federal funds rate does not directly impact mortgage rates, but Fed interest rate moves do influence Treasury bonds and the bond market as a whole. So, a rising or falling fed funds rate will give you an idea of how home loan rates will likely move.

So now that you're pretty much a monetary policy expert, when someone asks your group over coffee, "What's up with the fed funds rate?" you can take it.

How Fed rate moves affect your bank accounts, loans, credit cards, and investments.

The federal funds rate is the interest rate depository institutions charge each other for overnight loans. The effective federal funds rate (EFFR) is the median rate charged for those loans from the prior business day. Since the fed funds rate range was just lowered to 3.50% to 3.75%, the EFFR will soon fall between those two numbers. The real fed funds rate remains 3.88% today.

The federal funds rate is the interest rate banks charge each other for overnight loans. The discount rate is the rate depository institutions pay when they borrow directly from the Federal Reserve.

The federal funds rate affects the prime rate, which is the interest rate banks charge consumers for loans. The prime rate is usually about 3 percentage points higher than the fed rate; today it is 7.00%. It is expected to move lower because of the recent cut in the fed funds rate.

Since the Fed just reduced the fed funds rate, and the prime rate is typically 3 percentage points higher than the fed rate, the prime rate will likely move lower from 7.00%.

Laura Grace Tarpley edited this article.

The Federal Reserve cut short-term interest rates by a quarter point on Wednesday for the third time this year. However, the bond market is more influenced by what the Fed says than by its actions.

Following the Fed meeting, Chair Jerome Powell's press conference and the Federal Open Market Committee's dot plot provided indicators of what's to come in future interest rate decisions.

While most forecasts before the announcement anticipated two rate cuts in 2026, possibly by early summer and then in the fall, Powell and the FOMC suggested only one rate cut next year, with another possible in 2027.

Discounts to the federal funds rate drift through many corners of the economy, impacting how much we pay and receive in interest. Here's how the lower-rate cycle will impact deposits, credit, and debt.

Follow live coverage: Federal Reserve cuts interest rates by 25 basis points for third time this year

2025 has been a year of modest earnings on deposit accounts. A third rate cut won't help.

Your checking account earns only a fraction more than money under a mattress. The convenience of liquidity limits your earning power.

The national average of interest paid on checking accounts has barely budged much this year and remains at 0.07%. Imagine that moving even lower. Is it possible? Yes.

Interest rates on savings accounts are only marginally better, remaining at 0.40%. But savings accounts are for near-term money.

High-yield savings accounts have been more effective interest payers. Rates are still barely clinging to 4%, with some financial providers slightly above or below that.

This is one category where rate shopping really pays off. Especially as interest rates move lower.

Dig deeper: 10 best high-yield savings accounts

If you have $10,000 or more that you want to keep on the sidelines but ready to put in play, money market accounts have been convenient — but low-paying. National average payouts remain at 0.58%.

A better option might be a high-yield money market account, where interest rates are still near or a little better than 4%.

Read more: 10 best high-yield money market accounts

CD rates have crept slightly higher in the last month or so. A 12-month CD has slipped down to 1.64%, but you can find better deals if you're willing to take the time to hunt them down — and move your money around online.

Your minimum deposit and term will affect your rate.

Learn more: The best CD rates on the market

And then there are mortgage rates. Let's get this question out of the way: "When will mortgage rates go back down to 3%?" The quick answer: It's not likely anytime soon.

However, mortgage rates have dipped mostly lower since the end of May and are now about a half-point lower than one year ago. .

But a Fed cut may not be enough to significantly nudge them down much further. Mortgage rates are more influenced by the bond market, particularly the 10-year Treasury note. Its yield has been above 4% since the beginning of December. That's the bond market, once again, pricing in the expected next rate cut.

Housing industry analysts with the Mortgage Bankers Association and Fannie Mae predict mortgage rates to remain around 6% through 2026.

Dig deeper: When will mortgage rates go down? A look at 2025

Personal loan interest rates have finally dipped near 11% after hanging near 12% for nearly two years. Advertised personal loan rates now range close to 8%, and a Fed rate cut could move those costs down a bit further.

Credit card interest impacts everyone — except those who pay off their balance each month.

Credit card rates have spiraled from around 15% in 2021 to over 21% in 2025. For some reason, credit card rates haven't responded to the Fed's rate cuts and the falling prime rate.

Yahoo Finance tip: The best way to earn a lower credit card interest rate right away is to ask. If you make regular payments and have seen your credit score improving, it's a good time to call your credit card provider and ask for a lower interest rate.

Stock prices often react to the Fed’s rate actions, but they are only one factor among many affecting the investing climate and stock prices.

If you intend to manage your investments to suit the current environment, keep watch on broader economic and corporate profit trends alongside interest rates. If you prefer to stay conservative, fill your portfolio with high-quality stocks that have proven themselves in all economic cycles.

Then, wait patiently for long-term growth.

Many factors impact the cost of owning a home, such as your mortgage principal, property tax bill, homeowners insurance premium, and — this is a big one — your mortgage interest rate. When you understand how your mortgage rate is determined, you can better prepare yourself to buy or refinance a home.

Learn how mortgage interest works.

Your mortgage interest rate is the price your mortgage lender charges to issue your home loan.

“Mortgage interest rates are really important for home buyers because they directly affect how much you pay each month,” said Jeanine Thomas, founder and president of Sarasota Mortgage Group LLC via email. “When rates are lower, your monthly payment is less, which makes buying a home more affordable for you.”

Suppose you buy a $500,000 house, put $100,000 down, and finance the remaining $400,000 with a 30-year fixed-rate mortgage. Here’s what your monthly mortgage payment would look like at five different interest rates:

Please note: The above figures only represent mortgage principal and interest payments and don’t include property taxes, homeowners insurance premiums, or other related costs.

As you can see, your rate significantly impacts your monthly housing bill. Plus, if you keep your mortgage for the entire term, a higher rate can cost you tens or hundreds of thousands of dollars more over the life of the loan.

Read about how PITI (principal, interest, taxes, and insurance) affects your mortgage payments.

Mortgage interest rates are constantly in flux and can change multiple times daily. Here’s a snapshot of the last several years, including the 30-year mortgage interest rate Freddie Mac listed for the beginning of each month:

While today’s rate is significantly higher than the all-time lows during the peak of the COVID-19 pandemic in 2020 and 2021 — and rates may never drop to the 3% range again — it’s nowhere near the historic peak of 18.63%, which impacted borrowers in October 1981.

Rates have obviously decreased since then, and government-sponsored enterprise Fannie Mae predicts they will continue to decrease throughout 2026. However, most home buyers should expect to pay above 6% through the end of 2025 and into 2026.

Discover how to get a mortgage rate under 6%.

Several external factors influence mortgage rates. You can’t control these components, but understanding them can help you understand why rates are trending a certain way and know how they could change. Let’s take a look at some of the major issues that affect mortgage rates.

“When the federal funds rate — what banks charge each other for overnight loans — goes up, mortgage interest rates generally follow suit,” said Thomas. “This pattern holds true for [benchmark interest rates like] the Secured Overnight Financing Rate and the Constant Maturity Treasury rate as well.”

Although the federal funds rate doesn’t directly impact mortgage rates, the two are correlated. If the Federal Reserve cuts the federal funds rate (or even if investors expect the Fed to slash the rate soon), you can expect mortgage rates to drop too.

The Fed cut the federal funds rate three times in late 2024. Initially, many were surprised when mortgage rates didn't drop in reaction to the Fed rate cuts. However, there are several reasons why rates held stagnant and even increased as the Fed lowered its rate.

First, the anticipation of a lower Fed rate was already baked into mortgage interest rates, especially before the September meeting.

Second, mortgage rates also responded to commentary about what the fed funds rate would do in the future. For example, it became clear that the Fed wouldn’t cut the rate at its first several 2025 meetings, so home loan rates stayed high.

Third, as previously mentioned, the Fed is only one factor that impacts mortgage rates. There are others that affect interest rates more directly.

There was wide speculation that the Fed would lower the federal funds rate at its Sept. 2025 meeting, so home loan rates gradually decreased in the weeks leading up to this meeting. However, even with Fed rate cuts in October and December, mortgage rates haven’t declined significantly.

Learn how the Federal Reserve rate decision affects mortgage rates.

A mortgage-backed security is an investment vehicle that pays investors a portion of the principal and interest payments made by the mortgage holders in a collection of home loans. A government or private entity purchases home loans from mortgage originators. Then, that entity issues securities, or the rights to the principal and interest payments, to investors. Most mortgage-backed securities are issued by Fannie Mae and Freddie Mac, which are two U.S. government-sponsored enterprises (GSEs).

“Investors who buy MBS are the ones who ‘set’ rates by bidding on the bonds issued by Fannie [Mae], Freddie [Mac], or Wall Street investment funds,” said mortgage adviser Casey Fleming. “They know what yield they want for this type of investment, so they take the anticipated income stream and discount it by that rate to a present value. That's what they bid for a specific issue of bonds. The seller obviously takes the highest bid, so the cost of using that money (the interest rate) is now set.”

“When demand for MBS rises, their yields decrease, which in turn lowers mortgage rates. Conversely, a decrease in MBS demand causes yields to increase, leading to higher mortgage rates,” Thomas added.

The 10-year Treasury measures long-term interest rates. You can buy 10-year Treasury notes, bonds, and bills, which are all types of safe investments, just for different term lengths.

But the 10-year Treasury yield is also a good indicator of how rates on longer-term loans — like mortgages — are moving. If the 10-year Treasury yield goes down, mortgage interest rates tend to decrease too. By looking at 10-year Treasury yield predictions, you can get a decent idea of what mortgage rates could do over the next five years.

At its core, inflation results in increased prices and decreased purchasing power. Lenders feel the financial pinch like individual consumers do, increasing interest rates to offset the loss. Conversely, lenders will usually keep interest rates low when inflation is low because the institution’s money stretches further.

“Inflation, inflation, and inflation are all that really matter to long-term rates,” said Fleming. “Fed movement often correlates with inflation since they raise short-term rates to slow the economy to cool inflation.

“[However], it all comes down to what institutional investors think inflation will be for the duration of the time that their money will be out. They have to earn more than inflation, or else they are losing money. So, in a real sense, future inflation sets mortgage interest rates.”

Dive into how inflation impacts mortgage rates.

It makes sense that the economy at large plays a role in determining mortgage rates. Inflation, employment — these are all individual parts of the economy that affect rates.

“The economy affects mortgage rates a lot. When more people have jobs and make more money, they feel better about buying homes, which can push up mortgage rates because more people want loans. But in a weak economy where few people have jobs and wages stay the same, fewer people want mortgages, so rates can go down,” said Thomas.

Basically, a weak economy generally leads to lower rates (think of the height of the COVID-19 pandemic, when rates fell to all-time lows), and a strong economy results in higher rates.

Government assistance can also impact mortgage rates. “Programs that help people buy homes, like tax breaks or affordable housing loan programs, can make more people want mortgages, which might raise rates,” Thomas said.

She also explained that new government plans and laws might help keep rates low if they provide money for home loans. On the other hand, they can increase mortgage rates if they encourage more people to buy houses and drive up demand.

Learn how the national debt impacts the housing market.

The American economy and news cycle aren’t the only things that impact mortgage rates — rates can be affected by global events too.

“If other countries have problems with their economies, investors might put money into safe things like the U.S. Treasury bonds, which can lower mortgage rates here,” said Thomas. “But when global markets are steady, rates might go up because more investors are interested in bonds and mortgages.” She points out that elections or tensions between other nations might make investors choose to put their money in low-risk assets, like U.S. bonds, which can lead to lower rates.

Fleming once again pointed to the power of inflation. “The pandemic created huge supply chain issues, which created a shortage of goods. Then, government stimulus programs threw billions of dollars at Americans. Fewer goods to purchase and more money to buy them created low supply and high demand, and so an inflationary spiral, pushing up interest rates,” he said.

Read about whether the president influences mortgage rates.

External forces converge to set mortgage baseline rates. However, your loan details, financial standing, and new property information refine that baseline, resulting in a custom borrowing cost. These are factors you do have some control over. We’ll examine those elements more closely.

Your mortgage itself has a significant impact on your interest rate. Here’s how each characteristic contributes to it:

Term length: A shorter-term mortgage usually has a lower interest rate — for example, you’ll get a lower rate with a 15-year term than a 30-year one.

Type of mortgage: An FHA loan generally has a lower interest rate than a conventional mortgage. However, it often comes with higher mortgage insurance costs that are difficult to cancel. It’s crucial to weigh all the costs — not just the interest rate — when shopping for a mortgage.

Loan amount: A larger loan might have a higher interest rate because the lender takes on greater risk.

Down payment: A higher down payment will likely result in a lower interest rate because the lender assumes less risk.

Fixed vs. adjustable rate: In the past, adjustable rates started lower than fixed rates. However, fixed-rate mortgages have been the better deal lately. Ask prospective lenders to see both offerings.

Closing costs: Rolling your closing costs into your mortgage (rather than paying them in a lump sum on closing day) may result in a higher interest rate because you’re borrowing more money and putting less financial skin in the game up front.

Thomas also pointed out that you can buy mortgage discount points to lower your rate. Typically, a discount point costs 1% of your loan and lowers your mortgage rate by 0.25%. So, if you have a $300,000 mortgage with a 7% rate and buy one discount point, you’d pay an extra $3,000 at closing and have a 6.75% rate.

Learn 8 strategies for getting the lowest mortgage rates.

Thomas noted that a higher credit score can help you get a lower interest rate “... because it shows lenders you've managed debt responsibly in the past.” In addition, a lower debt-to-income ratio (DTI) — a measure of how much you earn in relation to how much you owe monthly, expressed as a percentage — may yield a lower interest rate because less debt suggests you’re able to afford mortgage payments and are a lower-risk borrower.

“The type of property you're buying also matters,” said Thomas. “Single-family homes usually have lower rates than condominiums, and primary residences generally get lower rates compared to second homes and investment properties.”

Plus, your property’s location can impact your interest rate. Your lender may offer different loan rates depending on your state and even your county.

Mortgage lenders start with the baseline, consider the individual borrower’s situation, and then may further adjust the rate based on the financial institution’s circumstances. For instance, “... larger banks typically face higher operational costs, while smaller lenders may have lower expenses, allowing them to offer lower rates to borrowers. [In addition], during periods of high demand, banks may raise rates to handle [the] increased workload efficiently,” said Thomas.

“The rates offered to borrowers can vary significantly between lenders due to variations in the profit margins they incorporate into their rates, creating interest rate differences by several percentage points,” Thomas continued. “Mortgage brokers often shop around among lenders to secure competitive rates through wholesale lending.”

MORE: See our top picks for mortgage lenders for first-time home buyers.

No matter what’s happening in the housing market, there are steps you can take to get the best possible mortgage interest rate. “Focus on improving your credit score by reducing debts and paying bills on time. Saving for a larger down payment can also enhance your eligibility,” said Thomas.

Fleming said the best thing you can do is shop around. But he points out that you should get quotes from multiple mortgage lenders on the same day if possible because rates change daily.

Mortgage rates aren’t the only costs that matter, though. You should also look at mortgage lenders’ fees when comparing companies.

“Consider the overall cost associated with the advertised interest rate, including origination fees, application fees, and discount points,” said Thomas. “For example, a lower advertised rate may not be the best option if the origination fees are higher, especially if the borrower plans to stay in the property for only a few years. Conversely, if the borrower intends to make this a long-term residence, the lower rate and higher fees may better serve them.”

Learn the difference between your mortgage APR vs. interest rate.

Currently, 30-year mortgage rates and refinance rates are roughly the same. However, there will be some variation from lender to lender, and refinance rates are sometimes slightly higher.

Locking in your mortgage interest rate guarantees it won’t change before you close on your house. “On purchase loans these days, a borrower should lock the rate as soon as they go into escrow because the market is so volatile, and if rates jump, they may no longer qualify. On refinance loans, a borrower can be a bit more strategic and try to play the market or wait for a short lock,” said Fleming.

You can change your mortgage rate during the home-buying process by paying for mortgage discount points. For every 1% of your loan (one point) you pay up-front, your lender will reduce your interest rate by a certain amount. After you close on your original home loan, you may be able to lower your interest rate by refinancing the debt. Your rate will also change periodically if you have an adjustable-rate mortgage (ARM) rather than a fixed-rate one.

Laura Grace Tarpley edited this article.