The QUONAE GroupCompass
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The QUONAE GroupCompass
Compass Profile
When the Federal Reserve makes news, one of the first questions we hear is whether mortgage rates moved with it. They don't move directly or automatically, because the two are connected more loosely than most people expect.
The Federal Reserve sets the federal funds rate, which is the overnight rate banks charge each other. It does not set 30-year mortgage rates. Lenders price mortgages based on the bond market, mainly the 10-year U.S. Treasury yield and mortgage-backed securities. Those markets react to what investors expect from inflation and economic growth, so they sometimes move before the Fed acts rather than after. A Fed rate change does filter into mortgage rates over time, but less directly and less predictably than many people assume.[1] Rates have been climbing this month. On September 16, daily rate tracking put the average 30-year fixed rate at 7.24%.[2] Freddie Mac's weekly average, which moves more slowly, reached 7.03% on September 24, its first reading above 7% since January 2025.[7]
The Fed's rate and mortgage rates move on related but separate tracks. Legend: white boxes show who sets each rate; dark boxes show what each rate affects; the ≠ sign means the two are not the same rate.[1]
Several leading economists expect 2026 to bring a more balanced housing market. Compass chief economist Mike Simonsen described the year as the start of “a new era where incomes rise faster than home prices and the deep freeze of the last few years begins to thaw.”[3] National Association of Realtors chief economist Lawrence Yun noted that inventory was running roughly 20% above year-ago levels, which gives buyers more choices and fewer bidding wars, and realtor.com chief economist Danielle Hale called it “the most balanced [market] it's been in almost a decade.”[4] The data supports that view. In January 2026, national inventory was up 10.5% from a year earlier, and 34.2% of listings had a price reduction, up from 33.5%.[5] By August 2026, the typical home was spending 60 days on the market, according to Realtor.com data published by the St. Louis Fed.[6]
The shift is modest, but buyers generally have more room to negotiate than they did a year or two ago.
As inventory and days on market rise, buyers typically gain a bit more room to negotiate. Legend: the lower, heavier side of the seesaw is the side with more leverage.[4][5]
At The QUONAE Group, we put plans in place before a home is ever listed to help soften swings like these. Reach out to find out more.
When a home isn't getting traction, two options often come up. The first is a price reduction. The second is a 2-1 buydown, which lowers the buyer's rate by about 2 points in year one and 1 point in year two before it returns to the full rate in year three. A 1-0 buydown works the same way but covers year one only. Both options are worth understanding whether you're buying or selling.
Each bar shows how much lower your interest rate is that year. The light bars are a 1-0 buydown and the dark bars are a 2-1 buydown. Using a 7.03% full rate as an example, a 1-0 buydown lowers the rate to 6.03% for year 1 only. A 2-1 buydown lowers it to 5.03% in year 1 and 6.03% in year 2. From year 3 on, both loans are at the full 7.03%.
| Year | 1-0 buydown rate | 2-1 buydown rate | Full rate |
|---|---|---|---|
| Year 1 | 6.03% (−1) | 5.03% (−2) | 7.03% |
| Year 2 | 7.03% (0) | 6.03% (−1) | 7.03% |
| Year 3 on | 7.03% (0) | 7.03% (0) | 7.03% |
Example only, using Freddie Mac’s 7.03% average (Sept. 24, 2026) as the full rate.
A 2-1 buydown costs more upfront than a 1-0. The cost is usually paid as a lump sum at closing and used to lower the monthly payment during the early years. Unlike a price cut, a buydown doesn't change the sale price. The exact cost depends on the loan amount and rate, and a licensed loan officer can calculate it for a specific home.
A single Fed decision is only one headline. Inventory, days on market, and buyer activity say more about the market you're in, whether you're buying or selling. If you'd like to talk through what this means for your plans, reach out any time.
Read the full Compass research piece this brief draws on:
View the Compass Research article →Not directly. The Federal Reserve sets the overnight federal funds rate, not 30-year mortgage rates. Lenders price mortgages off the bond market, mainly the 10-year Treasury yield and mortgage-backed securities, so a Fed move filters into mortgage rates over time but less directly and less predictably than many people assume.
A temporary buydown that lowers a borrower’s interest rate by about 2 percentage points in year one and 1 point in year two, before the loan returns to its full rate in year three. A 1-0 buydown lowers the rate by 1 point for year one only.
Freddie Mac’s weekly average was 7.03% on September 24, 2026, its first reading above 7% since January 2025.
Nicole Protheroe is not a licensed loan officer. Rate, loan, and buydown information in this brief is based on the cited sources, which are subject to change. For guidance on your own loan, please speak with a licensed loan officer.
All sources reviewed September 23–24, 2026. Figures follow each source's own methodology, reporting period, and definitions, and are subject to change at any time.
[1] CNBC Select, Jason Stauffer. “How does the Fed affect mortgage interest rates?” Nov. 17, 2023. https://www.cnbc.com/select/how-does-fed-affect-mortgage-interest-rates/
[2] Compass Research. “What the Fed Rate Hike Means for Homebuyers and Sellers.” Sept. 18, 2026. https://www.compass.com/newsroom/research/5t46FiR003vlnM3MLtq3iX/
[3] Compass, Inc. “Compass Market Outlook: 2026 Will Bring the Most Balanced Housing Market in Years” (Mike Simonsen, Chief Economist). Dec. 11, 2025. https://www.prnewswire.com/news-releases/compass-market-outlook-2026-will-bring-the-most-balanced-housing-market-in-years-302639637.html
[4] National Association of Realtors. “2026 Real Estate Outlook: What Leading Housing Economists Are Watching” (Lawrence Yun and Danielle Hale quoted). Jan. 5, 2026. https://www.nar.realtor/news/real-estate-news/2026-real-estate-outlook-what-leading-housing-economists-are-watching
[5] HousingWire, Rachel Bader. “Rising inventory brings balance to the 2026 U.S. housing market.” Jan. 21, 2026. https://www.housingwire.com/articles/2026-housing-inventory-trends/
[6] Federal Reserve Bank of St. Louis (FRED), Realtor.com data. “Housing Inventory: Median Days on Market in the United States,” series MEDDAYONMARUS, Aug. 2026: 60 days. Checked September 24, 2026. https://fred.stlouisfed.org/series/MEDDAYONMARUS
[7] Freddie Mac, Primary Mortgage Market Survey, via FRED series MORTGAGE30US: 7.03% (Sept. 24, 2026); last reading above 7% was 7.04% (Jan. 16, 2025). Checked September 24, 2026. https://fred.stlouisfed.org/series/MORTGAGE30US
1-0 vs. 2-1 buydown, using a 7.03% full rate
See Issue 05 for the full comparison with a price cut.