How the Federal Reserve Affects Mortgage Rates

The Federal Reserve is one of many influences on mortgage rates, along with inflation and economic growth.
How the Federal Reserve Affects Mortgage Rates

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Updated · 3 min read
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Written by Holden Lewis
Senior Writer/Spokesperson
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Reviewed by Michelle Blackford
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Edited by Mary Makarushka
Assigning Editor
Fact Checked

The Federal Reserve influences mortgage rates, but doesn't set them. On Nov. 7, 2024, the central bank reduced the federal funds rate by one-quarter of a percentage point to a range of 4.5% to 4.75%, a smaller cut than the one announced at the September meeting but a cut nonetheless. In the news release accompanying the announcement, the committee members noted that there's still progress to be made on employment and inflation.

Mortgage rates are influenced by many elements, including the inflation rate, the pace of job creation, and whether the economy is growing or shrinking. The Federal Reserve's monetary policy is a factor, too, and is set by the Federal Open Market Committee.

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