US Mortgage Rates 2026: 30-Year Fixed vs Fed Funds
Federal Reserve · USD · Pass-through 65% over 6 months
Transmission Chain
Average historical spread mortgage − policy rate: 2.10pp. Current spread: 2.92pp. Above the long-run average — banks are charging a wider risk premium than usual.
Historical Spread (5-Year Monthly)
Policy rate vs. typical fixed mortgage rate; the shaded area is the spread.
Implied 12-Month Forward Path
Where the typical fixed mortgage rate ends up if the futures-implied policy path holds and the historical spread reverts to its long-run mean.
How to read this page
The four tiles at the top show the live policy rate (set by Federal Reserve), the interbank rate (SOFR), and the typical fixed and variable mortgage rates available to a household in United States. The gap between the policy rate and the mortgage rate is the spread — what the lender adds on top to cover funding, credit risk and profit.
The first chart shows that spread over the last five years. When the shaded area widens, banks are charging more on top of the policy rate, usually because the long bond market has moved or because banks are pricing in extra risk. When it narrows, competition or central bank bond-buying is squeezing margins. The second chart — the implied 12-month forward path — takes the current futures market's bet on where the policy rate is heading, applies the historical spread, and shows where your mortgage rate would land if both relationships hold. It is not a forecast: it is what current market pricing already implies.
Country-specific spread drivers
The mortgage-minus-policy spread observed for United States (2.92pp current vs 2.10pp historical mean) decomposes into four primary drivers. First, the funding curve: jurisdictions whose lenders fund predominantly via covered bonds (Germany, Denmark, France, Sweden) inherit the swap-plus-covered-spread basis, which moved from 5-15 bp pre-2022 to 25-50 bp during the ECB's APP/PEPP unwind. Lenders funded via deposit franchise (UK, Australia) anchor more to short-rate transmission and deposit beta. US lenders sell loans into agency MBS pools, so the spread is sensitive to the primary-secondary MBS basis and to Fed SOMA reinvestment policy.
Second, prepayment optionality and convexity: products without economic prepayment penalty (US 30Y, Danish callable bonds) trade at OAS rather than nominal spread; OAS widening during rate volatility regimes (VIX-Treasury MOVE comovement) bleeds straight into the borrower rate. Penalty-protected European products (German Festzins under §489 BGB, French indemnité de remboursement anticipé) carry minimal optionality premium. Third, lender duration mismatch: if the dominant local product is short-fixed (UK 2/5Y) the lender's asset-liability gap is small and the spread is stable; if long-fixed (US 30Y, German 10Y) lenders rely on swap and MBS markets to hedge duration, and spread widens when those hedge markets stress. Fourth, regulatory caps and capital treatment: France's taux d'usure, prudential LTV/DTI floors (Switzerland, Australia, Canada), and Basel III risk-weight differentiation across LTV buckets all alter the marginal cost of lending and feed back into quoted rates with lags of one to three quarters.
Forward Path (Monthly)
| Month | Implied Policy Rate | Projected 30-Year Fixed | Spread |
|---|---|---|---|
| 2026-05 | 3.62% | 6.46% | +2.84pp |
| 2026-06 | 3.62% | 6.38% | +2.76pp |
| 2026-07 | 3.62% | 6.31% | +2.69pp |
| 2026-08 | 3.62% | 6.25% | +2.62pp |
| 2026-09 | 3.62% | 6.19% | +2.56pp |
| 2026-10 | 3.62% | 6.14% | +2.52pp |
| 2026-11 | 3.62% | 6.09% | +2.47pp |
| 2026-12 | 3.62% | 6.05% | +2.43pp |
| 2027-01 | 3.62% | 6.02% | +2.39pp |
| 2027-02 | 3.62% | 5.99% | +2.36pp |
| 2027-03 | 3.62% | 5.96% | +2.33pp |
| 2027-04 | 3.62% | 5.93% | +2.31pp |
How Fed policy reaches US mortgage rates
The Federal Reserve sets the Federal Funds Rate target, which directly drives the Secured Overnight Financing Rate (SOFR) — the post-LIBOR benchmark for nearly all dollar-denominated short-term funding. SOFR is what banks actually pay to borrow overnight. When the Fed hikes, SOFR moves within hours.
The transmission to a 30-year fixed mortgage is far less direct. Conventional 30-year mortgages are pooled into mortgage-backed securities (MBS) sold to institutional investors. Investors price those MBS at a spread over the 10-year Treasury yield, which itself reflects the market’s expectation of average Fed policy over the next decade plus a term premium. The result: a 25 bp Fed cut typically passes through to perhaps 10-15 bp of mortgage rate decline — and only after a delay of several months.
This explains why mortgage rates can rise while the Fed is cutting (as they did briefly in late 2024) when long-term inflation expectations or term premia move adversely.
Current rate snapshot
The full snapshot — current 30-year fixed, 5/1 ARM, SOFR, Fed Funds Rate, and the spread vs. policy — is rendered live at the top of this page from mortgage_rates.json. Methodology and data sources are listed at the bottom.
Historical spread vs. Fed Funds Rate
The chart shows the 30-year fixed mortgage rate vs. the Fed Funds Rate over the past five years. Two regimes stand out:
- 2021-2022: spread was abnormally narrow (roughly 1.5 percentage points) when Fed funds was near zero and MBS demand was strong.
- 2022-2024: spread widened to over 3 percentage points as MBS investors demanded compensation for prepayment uncertainty during the rapid hiking cycle.
- 2025-2026: spread has gradually compressed back toward its long-run average of approximately 1.7-2.1 percentage points as the cycle peaked and prepayment risk normalised.
For a US borrower, the practical implication is that mortgage rate moves do not equal Fed moves. The spread itself is the second-largest source of variation.
12-month forward path
The implied policy path is derived from 30-day Fed Funds futures quoted at CME. That path is then converted to an implied 30-year fixed rate by adding the country’s historical spread, smoothed by a 65% pass-through factor and a 6-month transmission lag (calibrated to the 2018-2024 episode).
If the futures-implied policy path holds and the spread reverts to its historical mean, the 30-year fixed rate should drift toward the projection in the chart above. This is not a forecast — it is the rate level consistent with current market pricing of Fed policy.
US-specific mortgage product norms
- 30-year fixed dominates: ~85% of new conventional originations.
- 15-year fixed offers ~50 bp lower rate but ~50% higher monthly payment.
- 5/1 ARM (5 years fixed, then annually reset against SOFR + margin) is priced ~50-100 bp below 30-year fixed.
- Jumbo loans above the conforming limit ($766,550 in most counties for 2026) used to carry a premium; in the post-2020 era they often price below conforming due to bank balance-sheet pricing.
- The Freddie Mac PMMS survey is the standard national reference for the 30-year fixed rate; it is published every Thursday and is the source most US news outlets quote.
Sources & methodology
- 30-year fixed and 15-year fixed: Freddie Mac Primary Mortgage Market Survey (PMMS).
- 5/1 ARM: FRED series MORTGAGE5US.
- Fed Funds Rate: Federal Reserve H.15 statistical release.
- SOFR: New York Fed reference rate.
- Implied policy path: CME 30-day Fed Funds futures (FF), front 12 contracts.
- Pass-through factor (0.65) and 6-month lag are calibrated to the 2018-2024 sample using monthly data.
For the underlying meeting probability tree see the Federal Reserve page. For the bond yield context driving 30-year mortgage pricing see the Yield Curve Monitor.