09/15/2026
You may be hearing a lot this week about the Federal Reserve potentially raising interest rates by 0.25%.
Naturally, the first question I get is:
“Does that mean mortgage rates are going up 0.25% too?”
The answer is NO — and this is one of the biggest misconceptions about mortgage rates.
The Federal Reserve does not directly set mortgage rates.
The Fed controls a very short-term interest rate called the Federal Funds Rate, which has a much more direct impact on things like credit cards, HELOCs, bank lending and other short-term borrowing.
A 30-year mortgage is completely different. Mortgage rates are driven primarily by the bond and mortgage-backed securities markets, which are constantly looking ahead and trying to predict inflation, economic growth, employment and future Federal Reserve policy.
🧁 The Market Has Already Been “Baking In” the Fed Hike
This is extremely important.
Markets don't normally wait until the Fed makes an announcement and then react from scratch. They trade based on what they expect will happen next.
Over the past week, we received stronger inflation data, the labor market remained relatively resilient, and oil prices surged — all of which increased expectations that the Fed would raise rates.
The bond market reacted accordingly.
So if the Fed raises its benchmark rate by 0.25%, that does NOT mean a 6.50% mortgage suddenly becomes 6.75%.
A large portion of the expected Fed hike has already been reflected in today's bond yields and mortgage pricing.
👀 What I'm Watching More Closely Than the Rate Hike
The bigger event may actually be what Fed Chair Kevin Warsh says AFTER the decision.
Markets will be listening very carefully for clues about:
• Is inflation still the Fed's biggest concern?
• Does the Fed believe additional rate hikes may be necessary?
• Is the economy beginning to slow?
• What does the Fed see happening with employment?
• When could rate cuts eventually come back into the conversation?
That outlook can potentially move mortgage rates more than the actual 0.25% Fed decision.
🛢️ Why Inflation — and Oil — Matter So Much
Think about buying a bond that pays you a fixed return over many years.
If you lend someone $1 today, but inflation means that dollar has considerably less purchasing power when you're paid back, you're going to demand a higher interest rate to compensate for that risk.
That's why inflation is generally bad for bonds — and bad for mortgage rates.
Oil is particularly important because energy works its way through much of the economy: transportation, shipping, manufacturing, airlines, agriculture and ultimately the prices consumers pay.
If oil remains elevated and keeps inflation higher, that can put upward pressure on longer-term interest rates.
👷 Here's the Interesting Part: Bad Employment News Can Actually Be GOOD for Mortgage Rates
It sounds backwards, but this is an important relationship.
When the economy and labor market are strong, investors are generally more comfortable taking risk and putting money into stocks and other investments in search of higher returns.
If the labor market begins deteriorating or recession concerns increase, investors often move money toward the relative safety of U.S. Treasuries and bonds.
More demand for bonds can push bond yields lower — and that can help mortgage rates move lower as well.
So strangely enough:
Bad economic news can sometimes be good news for mortgage rates.
🚗 The Easiest Way to Think About It
Think of “interest rates” as a car.
The Fed Funds Rate is the steering wheel. It can turn left or right very quickly when the Federal Reserve makes a decision.
Mortgage rates are more like the accelerator and momentum of the car. They respond to where the economy, inflation and financial markets appear to be heading — and markets often start moving well before the Fed actually turns the wheel.
They're part of the same car, but they perform very different jobs.
🎯 Bottom Line
Don't assume that if you hear Wednesday that “The Fed raised rates 0.25%,” mortgage rates just increased 0.25%.
That's simply not how mortgage pricing works.
The expected hike has already been largely anticipated by financial markets. What I'll be watching much more closely is Kevin Warsh's message about what comes NEXT — inflation, oil, employment, economic growth and whether the Fed believes additional hikes will be necessary.
That's where we could see the next meaningful move in the bond and mortgage markets.
As always, I'm watching this every day so my clients don't have to. If you're thinking about buying, selling or refinancing, reach out to me. I'm happy to explain what's happening and, more importantly, how it actually affects your specific situation.
PS. The Fed’s two-day meeting is underway September 15–16, with the decision scheduled for 2:00 PM ET Wednesday and the press conference at 2:30 PM ET, so the post-meeting language is indeed something worth emphasizing to clients. (federalreserve.gov)
