Rates Hold Near Three-Year Lows as the Federal Reserve Signals Patience
- Feb 2
- 4 min read
This past week, interest rates continued to hover near three-year lows as markets headed into the latest Federal Reserve meeting. While no policy changes were announced, the language coming from the Fed — and how markets reacted — provided important insight into where rates and housing may be headed next.
Below is a breakdown of what happened, why it matters, and what to watch in the week ahead.
The Fed Meeting: Policy Holds, Language Shifts
Last week’s Federal Reserve meeting came and went largely as expected, with no changes to interest rate policy. However, the tone of the statement was notable. The Fed upgraded its assessment of economic growth, describing activity as expanding at a “solid” pace rather than “moderate,” signaling increased confidence in the economy’s resilience.
That subtle change reinforces the Fed’s current stance: the economy is holding together well enough that there is no immediate urgency to cut rates.
Fed Chair Jerome Powell underscored this balance during his press conference, stating:
“The upside risks to inflation and the downside risks to employment have diminished.”
— Jerome Powell, January 28, 2026
This comment was widely viewed as the most important takeaway, suggesting a lower risk of both accelerating inflation and rising unemployment.
While the majority of the committee favored holding steady, there were two notable dissenters. Governors Stephen Miran and Christopher Waller voted in favor of a 25-basis-point cut, signaling that internal debate remains over when the first rate cut could occur.
Chair Powell avoided political commentary and consistently steered the discussion back to economic data and monetary policy, noting that the Fed views the economy as being in an “OK” place and can afford to remain patient as it seeks additional clarity on inflation and labor trends.
Markets appeared to agree with that assessment, as stocks moved higher and mortgage rates drifted lower following the meeting.
Housing Price Gains Begin to Ease
On the housing front, recent data offered encouraging news. The S&P Case-Shiller Home Price Index showed home prices rising 1.4% year-over-year in November — a slower pace than seen in recent years.
A moderation in home price growth, combined with lower mortgage rates, is a meaningful step toward improving affordability.
Looking ahead, 2026 is expected to mark the first time in 15 years that wage growth outpaces home price appreciation. While that shift won’t solve affordability challenges overnight, it represents continued progress in the right direction.
Why 4.20% Matters for Mortgage Rates
From a rates perspective, the 10-year Treasury yield remains a key driver of mortgage rates. This week, the yield moved back above 4.20%, a level that acted as a ceiling for much of last year and continues to serve as an important technical threshold.
If the 10-year Treasury remains above 4.20%, mortgage rates are unlikely to see meaningful improvement. For rates to move sustainably lower, the 10-year will need to decisively break beneath that level.
Where Mortgage Rates Stand Today
30-Year Fixed Mortgage Rates
(Freddie Mac daily average, January 29, 2026)
Current average rate: ~6.10%
Weekly change: modestly up from ~6.09%
Year-over-year change: down from ~6.95% (January 2025)
10-Year Treasury Yield
(Daily close, January 29, 2026)
Current yield: 4.24%
Weekly change: slightly lower from ~4.25%
Year-over-year change: down from ~4.55%
Despite short-term fluctuations, mortgage rates remain near the lowest levels seen in the past three years.
Mortgage Market Guide Candlestick Chart
Each candle represents one day of trading. As mortgage bond prices move higher, rates move lower. You can see on the right side of the chart, how mortgage bond prices continue to trade within a whisker of three-year highs, meaning three-year rate lows.
Chart: Fannie Mae 30-Year 5.0% Coupon (Friday, January 30, 2026)
Economic Calendar for the Week of February 2 - 6
What We’re Watching Next
Attention now shifts to the labor market. In the coming week, markets will closely monitor:
ADP Employment Report
JOLTS (Job Openings and Labor Turnover Survey)
The monthly Jobs Report
These data points will help confirm whether the labor market continues to cool gradually. There are no major Treasury auctions scheduled, and with the Fed meeting now behind us, Fed commentary resumes with a renewed focus on incoming data.
Bottom Line
Managing expectations remains key. While the rate environment is likely to remain range bound in the near term, the longer-term affordability story is slowly improving — supported by easing home price growth, steady wage gains, and mortgage rates near multi-year lows.
At Fortress Mortgage Advisors, we continue to monitor market trends closely and help clients understand how these shifts may impact their home financing decisions. Staying informed and planning strategically remains the best approach in a changing market.
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As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.
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