How are mortgage interest rates actually set?

Your mortgage rate isn't set by the Federal Reserve directly – it tracks the bond market, especially the 10-year Treasury yield and mortgage-backed securities. When investors demand higher yields (because of inflation fears or strong economic data), mortgage rates rise; when they pile into bonds, rates fall. On top of that market base, lenders add a margin and adjust your personal rate for your credit score, down payment, loan size, property type, and whether it's a primary home. That's why two people can shop the same day and get different quotes. Because pricing varies, get quotes from at least three lenders within a short window so credit pulls count as one inquiry. To see how the monthly payment changes across rates and prices, model it at wealthserene.com/tools/home-affordability.