Mortgage rate mythbusting: Destroying the most common misconceptions

Bad takes about mortgage rates spread faster than wildfire — especially when they come from politicians or go viral on X. But when these narratives are misleading or flat-out wrong, they don’t just confuse consumers. They erode trust in our industry and inject unnecessary chaos into an already complex housing market.

It’s time to set the record straight on the most persistent myths about mortgage rates — some of which have been amplified by high-profile figures who should know better.

Myth #1: “One man controls all interest rates”

On July 31, Rep. Thomas Massie (R-KY) fired off this tweet: “It’s absurd that one man sets interest rates for a ‘free’ country. End the Fed.”

The tweet racked up 3.7 million views. It also fundamentally mischaracterizes how U.S. monetary policy actually works.

The reality: Interest rates are set by the Federal Open Market Committee (FOMC) — a 12-member voting body that includes seven governors appointed by the president and confirmed by the Senate, the New York Fed president and four rotating regional Fed presidents.

Jerome Powell may be the face of Fed policy, but he doesn’t set rates by decree. Policy moves are debated, voted on and shaped by extensive data analysis and institutional perspectives. The “one man” narrative isn’t just wrong — it’s dangerously simplistic.

Myth #2: “The Fed doesn’t control mortgage rates”

The reality: This one’s particularly insidious because it’s partially true, which makes it harder to debunk — but let’s agree that the statement by itself is filled with falsehoods. The Fed doesn’t directly set mortgage rates, yes, but its policies have massive indirect influence on mortgage pricing.

Most mortgage rates — especially the 30-year fixed — track closely with the 10-year Treasury yield. Fed actions like rate hikes, forward guidance and quantitative tightening directly impact investor expectations, bond yields and ultimately mortgage rates.

Fed Chair Powell made this crystal clear during a 2025 Senate hearing:

“Monetary policy works through interest-sensitive spending. There is no more interest-sensitive spending than buying a house and having a mortgage… Our tighter policy is having an effect on economic activity in the housing sector.”

He added: “The Federal Reserve does not control housing supply, but its actions do have a massive effect on housing supply.”

Translation: The Fed isn’t pushing the button on your mortgage rate, but it’s absolutely adjusting the levers that move the market.

Myth #3: “Mortgage spreads don’t matter”

The reality: This isn’t a myth born from overt misinformation — it’s a myth born from omission. Most media coverage and political commentary stops at the 10-year Treasury or Fed Funds Rate. But mortgage rates are also shaped by the spread between the 10-year yield and the 30-year fixed rate.

This spread is driven by investor appetite, risk premiums and MBS pricing. Ignoring spreads leaves consumers with an incomplete picture.

As HousingWire Lead Analyst Logan Mohtashami puts it: “We’re starting to teach people mortgage spreads, and I’m really happy about that — because nobody knew what it was, but it’s so important.”

During periods of financial stress, spreads can widen, keeping rates elevated even if Treasury yields fall. The myth isn’t that spreads are fake — it’s that they’ve been left out of the conversation for too long.

Myth #4: “Higher federal debt means higher mortgage rates”

The reality: The federal debt has been increasing for decades, while mortgage rates have been declining over the same period. The recurring idea that bond vigilantes will punish the U.S. with higher mortgage rates due to federal debt has been debunked repeatedly.

In the 1990s, the federal debt was much lower, along with a lower debt-to-GDP ratio and smaller deficits, but mortgage rates during that decade were higher on average than from 2010-2025.

Mohtashami has pointed out that 65% to 75% of the variability in the 10-year yield and 30-year mortgage rates throughout an economic cycle is influenced by Federal Reserve policy, along with nominal growth and inflation expectations. The overall state of the U.S. economy also plays a crucial role in determining these rates.

Bottom line: We need smarter conversations

As misinformation and partial perspectives about mortgage rates swirl through the industry, professionals must double down on financial literacy. Mischaracterizing rate policy doesn’t just confuse consumers; it undermines confidence in the market and distracts from real economic issues. As I discussed with Sarah Wheeler on the recent HousingWire Daily podcast, consumer psychology is one of the leading factors in our current “stuck” housing market. 

Mortgage professionals, economists and journalists all have a role in correcting the record. The path to affordability starts with understanding, and understanding begins with fact-based reporting — not viral outrage.

The housing market is complex enough without adding manufactured confusion to the mix. Let’s focus on what actually moves rates, not what gets retweets.