Fed Funds Rate vs. Mortgage Rates — A Quick Resource

MARKET COMMENTARY -What the Fed's 25bps Hike Means for Your Mortgage.
Mike Zschunke, Private Client Real Estate Advisor
@Shift1 Properties, Berkshire Hathaway HomeServices Arizona Properties | September 16, 2026

FOMC DECISION+25 bps • New target range: 3.75%–4.00%
Vote: 12–0 • First hike since 2023

The headline gets misread constantly: raising the fed funds rate does not automatically raise your mortgage rate, and it doesn't necessarily push the 10-year Treasury higher either.

The Fed Controls the Short End — Not Your Mortgage
The fed funds rate is the overnight rate banks charge each other. Thirty-year mortgage rates are set in the capital
markets: Treasury yields, mortgage-backed securities (MBS) pricing, and the spread investors demand for prepayment and credit risk. A 25bps move at the front of the curve is not a mechanical markup on a 30-year loan.

Why Hike at All?
Monetary policy manages financial conditions, demand, and inflation. When inflation runs too hot, higher
short-term rates put a brake on demand; when the economy is weak and inflation is contained, lower rates add
stimulus. The goal is a stable economy — not runaway prices, not a crash. Think of a controlled brake on a freight
train, not a driver slamming the pedal because the car is already off the road.

The Gundlach Take
DoubleLine's Jeffrey Gundlach argued the Fed should have gone 50bps — a “stun and done” move — pointingto the 2-year Treasury sitting more than 100bps above the fed funds rate as evidence the market had already
priced in more tightening than the Fed delivered.
Most people — a surprising number in real estate included — hear “Fed raises rates” and assume everything gets more expensive. That's backwards: a well-telegraphed hike is the Fed fighting inflation and defending price stability. Markets hate uncertainty more than any particular rate level — that's a large part of why the Fed exists: to be the adult in the room.

What Actually Moves Your Rate
• The 10-year Treasury yield
• MBS spreads (the gap between the 10-year and mortgage rates)
• Inflation expectations
• Volatility — unexpected, violent moves are the real risk, not a well-telegraphed hike.

What Buyers & Sellers Need to Know
• Talk to your trusted real estate or mortgage professional — rate headlines don't translate directly into your
terms.
• Go over your specific numbers — your rate, your timeline, your goals — and go from there.

Mike Zschunke | 203.733.5877 | Shift1Properties.com | Berkshire Hathaway HomeServices Arizona Properties