Mortgage-Backed Securities (MBS) (MBS)
Direct definition
Bonds backed by pools of mortgages, whose yields 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
Lenders sell mortgages into the secondary market, where they're pooled and securitized. Investors buy MBS for yield, and their appetite drives daily mortgage rate movement.
Why it matters
Understanding MBS is the key to understanding why mortgage rates move day to day.
Where you may see it
- Secondary market commentary
- Rate lock confirmation
- Investor disclosures
A real-world example
A rally in MBS prices lowers their yields; lenders re-price rate sheets lower that afternoon.
Educational and illustrative only
A common misunderstanding
MBS pricing influences mortgage rates, but an individual borrower's rate isn't set directly by MBS trades minute to minute — lenders build in their own margins and costs.
Ask Vabasso AI
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