Federal Reserve
Direct definition
The U.S. central bank, which sets short-term policy rates that indirectly influence mortgage rates.
Written by the Vabasso Mortgage Editorial Team · Reviewed against agency and federal sources · Read our editorial policy for how we research and review mortgage content
Plain-English explanation
The Fed doesn't set mortgage rates directly. Its policy on short-term rates, balance-sheet actions, and inflation expectations shape the bond market that determines mortgage pricing.
Why it matters
Fed announcements can move mortgage rates within hours.
Where you may see it
- Market commentary
- Rate sheets
A real-world example
A hawkish Fed meeting can push bond yields up and add 0.125–0.25% to mortgage rate sheets that afternoon.
Educational and illustrative only
A common misunderstanding
The Federal Reserve doesn't set mortgage rates directly — its policy actions influence the broader bond market that mortgage pricing follows.
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This glossary provides general educational information. Mortgage terminology, qualification methods, forms, timelines, fees, program rules, and legal meanings may vary by lender, investor, loan program, property, occupancy, state, and transaction. Definitions do not represent loan approval, legal advice, tax advice, or a commitment to lend.
- Author
- Vabasso Mortgage Editorial Team
- Reviewed by
- Vabasso Mortgage Licensed Advisory Team
- Last reviewed
- July 30, 2026