Why Mortgage Rates Don’t Always Follow the Fed

One of the most common questions I hear from my clients is: “Why do mortgage rates go up and down even when the Federal Reserve doesn’t move its rate?”

Here’s the key: mortgage rates do not follow the Fed rate directly. Instead, they track the 10-year Treasury yield, which is influenced by the bond market.

The Fed funds rate is short term — it’s what banks charge each other overnight, and the Fed controls it directly. Mortgage rates, however, are long term. They move based on:

• Inflation expectations

• Forecasts for economic growth

• Global investor demand for safe assets

• Predictions about future Fed moves

Think of it this way: the Fed sets the short-term thermostat, but the bond market sets the long-term temperature — and that’s what drives your mortgage rate.

Northern New Jersey Home Buyers: More Inventory, More Choices

For home buyers across Northern New Jersey, this is good news. Rates have been coming down slightly, and housing inventory is growing month over month. That means you’ll have more homes to choose from and a bit more time to make a decision.

If you’re buying, it’s still important to:

• Stay pre-approved

• Understand how the 10-year yield impacts mortgage rates

• Explore your “upside opportunities” with a trusted real estate professional

Northern New Jersey Home Sellers: Preparation Is Key

For sellers, the story is slightly different. Listings are increasing, which gives buyers more options. That means your home needs to stand out in the market.

To sell successfully in today’s market, it’s critical to:

• Prepare your home thoroughly for inspections

• Showcase upgrades and improvements to maximize value

• Work with an experienced agent who knows how to market competitively

While homes are staying on the market a little longer — on average a couple of weeks instead of just a weekend — this is still much shorter than pre-COVID market timelines.

The Bottom Line: Balance Is Returning to the Market

August’s real estate trends show a more balanced housing market in Northern New Jersey. Buyers now have more inventory and sellers must focus on preparation and strategy.

As we move into fall, watch labor reports, jobs data, and most importantly, the 10-year Treasury yield — because that’s what will shape mortgage rates moving forward.

Work With a Northern New Jersey Realtor Who Knows the Market

Whether you’re buying or selling in Northern New Jersey, I’m here to guide you through the process. If your town isn’t listed in this month’s update, reach out and I’ll provide a local report tailored to your area.

Ready to make your next move? Let’s schedule a consultation and create a strategy that works for you.