When the Federal Reserve changes interest rates, homebuyers and homeowners often assume mortgage rates will immediately move in the same direction. The relationship, however, is more complicated.
On September 16, 2026, the Federal Reserve raised its target range for the federal funds rate by one-quarter percentage point to 3.75%–4.00%. The change becomes effective September 17.
That decision affects short-term borrowing costs and is closely connected to the Prime Rate used by banks. Products such as Home Equity Lines of Credit (HELOCs), credit cards and some other variable-rate loans are often tied directly or indirectly to Prime, so changes in Federal Reserve policy can affect those borrowing costs relatively quickly.
Mortgage Rates Are Different
One of the most common misconceptions is that the Federal Reserve directly sets mortgage rates.
It doesn’t.
Long-term fixed mortgage rates tend to track the bond market, particularly the yield on the 10-year U.S. Treasury, much more closely than they track the federal funds rate. Freddie Mac research has found a strong historical relationship between the 10-year Treasury yield and 30-year fixed mortgage rates, although the two do not move in perfect lockstep.
That distinction is particularly important right now.
Immediately before the Federal Reserve’s September meeting, the 10-year Treasury yield had risen to 5.00% on September 15, according to Federal Reserve data. Meanwhile, Freddie Mac reported that the average 30-year fixed mortgage rate was 6.76% for the week ending September 10.
As a result, a Federal Reserve announcement does not necessarily tell buyers what will happen next with mortgage rates. Treasury yields, inflation expectations, economic data, investor demand for mortgage-backed securities and the spread between Treasury yields and mortgage rates all play a role.
An Overlooked Opportunity: Assumable Mortgages
For buyers in Pima County, there is another financing strategy worth considering.
There are currently approximately 95 homes for sale in Pima County with assumable mortgages carrying below-market interest rates.
An assumable mortgage may allow a qualified buyer to take over the seller’s existing mortgage—including its existing interest rate and remaining loan balance—rather than financing the entire purchase at today’s prevailing mortgage rates.
Many FHA and VA mortgages are potentially assumable, subject to the applicable loan requirements and approval of the assuming borrower.
Consider a homeowner who purchased or refinanced when mortgage rates were around 3%. If that homeowner has an assumable loan, a buyer who qualifies to assume it could potentially finance a significant portion of the home’s purchase price at that existing rate.
There is an important catch: the buyer generally must account for the difference between the seller’s remaining mortgage balance and the purchase price.
For example, if a home sells for $400,000 and the assumable mortgage has a remaining balance of $300,000, the buyer would need to address the approximately $100,000 difference through cash, eligible secondary financing or another acceptable financing structure.
That means assumable financing isn’t the right solution for every buyer or every property. But in today’s rate environment, it is an option buyers should know exists.
Look Beyond the Headline Rate
Real estate financing isn’t simply about asking, “What is today’s mortgage rate?”
The better question is: What financing strategy makes the most sense for this particular buyer and this particular property?
That could be a conventional, FHA, VA or USDA mortgage. It could involve an assumable mortgage. For an existing homeowner, a HELOC or other home-equity product could potentially provide access to equity without replacing an existing low-rate first mortgage.
With approximately 95 below-market assumable mortgages currently attached to homes for sale in Pima County, buyers who limit their search to traditional financing may be overlooking opportunities.
Understanding both the real estate market and the financing available for a property can make a significant difference in the options available to a buyer.
John Backer is Team Leader of The Backer Team at SimpliHŌM and is both a licensed REALTOR® and Mortgage Loan Officer with NEXA Lending.
This combination allows John to approach a transaction from both the real estate and mortgage perspectives, helping consumers understand not only the homes available to them but also the financing strategies that may be available.
John is also the creator of ConnectNeighbors.com, a nationwide network of neighborhood, city, county and state websites designed to connect residents with local information, real estate resources, businesses and community professionals.
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