The Real Reason Your Mortgage Rate Isn’t Falling
The Simple Truth About How Mortgage Rates Actually Work
By Niki MacDuff, Mortgage Lender & Real Estate Broker
The Federal Reserve has cut rates three times this year.
Inflation has cooled from nine percent to under three percent.
Yet your mortgage rate is still above six percent.
Here’s why—and what you actually need to know as a homebuyer or homeowner right now.
The Fed Rate vs. Your Mortgage Rate
Most people think the Federal Reserve directly controls mortgage rates. That’s not how it works.
The Federal Reserve controls something called the federal funds rate. That’s the interest rate banks charge each other for overnight loans. When the Fed cuts this rate, it makes short-term borrowing cheaper.
Credit cards, car loans, and business lines of credit all feel the impact quickly.
Mortgage rates don’t work that way.
How Mortgage Rates Actually Work
Mortgages are long-term commitments.
You’re borrowing money for fifteen or thirty years. Lenders don’t price those loans based on what happens overnight. They price them based on the 10-year Treasury bond, which reflects where investors think the economy is headed over the next decade.
Right now, the 10-year Treasury is yielding around 4.2%. But mortgage rates are sitting above 6%.
That gap is called the spread.
Think of the Spread Like a Restaurant Markup (Not Mayo)
- A restaurant buys ingredients at wholesale cost, then charges you retail price.
- The difference covers their rent, labor, risk of spoilage, and profit.
- Mortgage lenders do the same thing. They borrow at Treasury rates, then charge you more to cover their costs and risks.
In normal times, that markup runs about 1.5 to 2 percentage points. Right now it’s closer to 3 percentage points.
That extra cushion is costing you money.
3 Things Keeping Mortgage Rates High Right Now
1. Inflation Hasn’t Actually Cooled Everywhere
Rent is still climbing in most major cities. Insurance costs are up double digits. Services like childcare and healthcare keep rising faster than wages.
Lenders see those numbers and worry that inflation could accelerate again, so they’re charging more to protect themselves.
2. The Federal Reserve Stopped Buying Mortgage-Backed Securities
During the pandemic, the Fed was the largest buyer in the market. That kept the markup artificially low. Now private investors set the price, and they want higher returns for taking on the same risk.
3. Uncertainty Makes Investors Nervous
Geopolitical tensions, government debt concerns, and an uneven housing market all signal volatility. When investors feel uncertain, they demand bigger markups.
The rates are not coming down anytime soon until three things happen: inflation settles completely, the Fed provides clearer support, and investors feel safer about the future.
None of those conditions exist today.
I’m sorry to be the bearer of realistic news.
Even optimistic forecasts only see mortgage rates dipping below 6% by late 2026.
Keep This in Perspective
Today’s 30-year mortgage rates are around 6.3%. That feels high compared to the ~3% lows we saw during COVID.
But keep perspective: The 50-year historical average is roughly 7.7%… and remember, in the early 1980s rates peaked above 18%.
We’re actually not far from normal.
So What Should You Do If You Want to Buy a Home?
The lesson isn’t to wait for rates to return to 3%.
That is not the world we live in, and I’ll bet you dollars to donuts that doesn’t happen anytime soon.
The lesson is to make decisions in the world we actually live in.
- If you’re buying: Adjust your budget or explore different neighborhoods. There are strategies we can use to make homeownership work in today’s market.
- If you’re refinancing: Wait for another half point drop rather than holding out for the bottom that may never come.
- If you’re on the fence: Let’s talk about your specific situation. Sometimes the right move is to act now. Sometimes it’s to wait. It depends on YOUR circumstances—not headlines.
The market you’re in is the market you’ve got.
And as your mortgage lender and real estate broker, my job is to help you navigate it with clarity, honesty, and a plan that actually works for your life.
Ready to Talk About Your Options?
Whether you’re buying your first home, refinancing, or exploring investment properties, let’s have a real conversation about what makes sense for YOU.
Schedule a Discovery Call with Niki MacDuff
Niki MacDuff
California Real Estate Broker #01244064
Mortgage Lender NMLS #1847894
MacDuff Homes Realty
Helping you move forward with confidence—one smart decision at a time.
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