Mortgage rates continue to be at the lowest level we've seen in a few years. It's welcome news for homeowners looking to refinance, since they can react quickly to rate shifts. But will these numbers stick around long enough to help prospective home buyers who remain at the mercy of tight inventories and heavy competition?
The average rate on a 30-year fixed-rate mortgage was at 5.87% APR in the week ending Feb. 26, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point. Yes, this is modestly higher week-over-week, but this still has us (along with most everyone else reporting on mortgage rates) at the lowest level since September 2022. Even Freddie Mac's weekly survey, which is retrospective and tends to be slow to reflect shifts, is officially below 6%.
Judging by the usual frontstage indicators — inflation data, Federal Reserve antics — mortgage rates should be rising. That means we have to look behind the scenes to understand why rates have been falling. Brace yourself, it’s about to get wonky.
The answer starts with Treasury yields
We need to start by understanding how lenders determine mortgage rates. The Federal Reserve doesn't set mortgage rates, but Fed decisions and the overall economic environment are major factors. These influence stock and bond markets, and bond markets in particular are key to mortgage rates. Here's how that relationship works.
The primary vs. secondary mortgage market
The mortgage market has two levels. The primary mortgage market is consumers taking out home loans. The secondary market is what happens next: Lenders generally sell the loans, using that income to make new loans. The biggest buyers of those loans are government-sponsored enterprises Fannie Mae and Freddie Mac, which buy conforming, conventional mortgages (by far the most common loans in the U.S.).
Fannie and Freddie turn bundles of comparable loans into mortgage-backed securities (MBS), which are investments that act sort of like bonds, paying investors a fixed return based on the rates of the mortgages in the pool. This whole process keeps the mortgage market moving.
What's a spread?
Mortgage rates are typically benchmarked to the yield on the 10-year Treasury note, yes, even though most mortgages have much longer terms. Most folks will sell or refinance their home loans at some point, so the 10-year note is a fair comparison.
In theory, that means MBS and 10-year T-notes attract the same crowd of investors. But MBS are inherently riskier than Treasuries because, like we just said, mortgage borrowers can refinance, sell early, or default. Because of that risk, as well as the added costs associated with making home loans, mortgage rates are always higher than the 10-year Treasury yield to compensate investors. This difference is called the spread.
Treasury yields have fallen in recent days, as investors reacted not just to the Supreme Court’s Feb. 20 tariff ruling but to the president’s response. Fears of a trade war promptly triggered a “flight to safety,” with investors moving from stocks into bonds (like those Treasury notes). When demand for bonds rises, prices go up and yields fall. (Bond payments are fixed, so when prices increase, the return as a percentage of the price — a.k.a. the yield — drops.) There's that wonkiness I promised.
The spread narrows
Since mortgage rates are tied to 10-year Treasury yields, falling yields help explain lower mortgage rates. But focusing on that tariff reaction doesn't explain why we saw 30-year rates starting with fives before Feb. 20. There's more going on here.
Mortgage rates and Treasury yields move together, but they aren't always perfectly parallel lines. Mortgage rates can move up or down due to other drivers, which can widen or narrow the spread. Again, the spread compensates investors for taking on the additional risk of MBS relative to T-notes. If MBS become more attractive to investors and command less of a premium, the spread will narrow, bringing mortgage rates down. Spoiler alert: The spread's been narrowing.
Mortgage rates can go their lowest when MBS are bought by investors that don't actually care about the return. If you're asking, "Who on earth would that be?" it's buyers like the Federal Reserve. In the case of the Fed, they're not looking for a monetary return on their investment — they're trying to stabilize the economy. That's a major reason we got such low mortgage interest rates in 2020 and 2021: The Fed was buying billions of dollars' worth of MBS each month. With that type of guaranteed buyer, mortgage lenders can more confidently offer lower mortgage rates.
A government-sponsored spending spree
You might remember that back in January, President Trump ordered a $200 billion purchase of mortgage-backed securities. The order was vague, but Federal Housing Finance Agency Director Bill Pulte later clarified that Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs), would make the purchase. Critics argued a one-time purchase wouldn’t have much impact compared to the Federal Reserve’s sustained MBS buying during past crises. (For what it's worth, we saw mortgage rates drop abruptly on the news, but quickly rebound.)
Turns out, Fannie and Freddie stepped in well before January. Throughout 2025, the GSEs bought billions in MBS each month, growing their holdings over the course of the year. Fannie and Freddie also significantly increased their mortgage portfolios — meaning they’re buying mortgages on the secondary market and keeping them on their books instead of packaging them into new MBS.
We don't know exactly what Fannie Mae and Freddie Mac have bought so far in 2026, but we do know that near the end of January, reports surfaced that FHFA Director Pulte had dramatically raised the caps on the amount of MBS the GSEs can hold. It's not outside the realm of possibility that the mortgage rates we're seeing now are the fruits of these GSE actions.
So, will mortgage rates in the 5s stick around?
If we zoom out, average 30-year mortgage rates have been trending downward since May, and rates have stayed below 6.25% since November. This improvement isn't that new. But psychologically, moving from a rate that starts with six to one that starts with five feels like a huge difference. And if these GSE actions are indeed what's supporting this lengthy slide, we could quite possibly see these fives last.
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