The Federal Reserve sets the overnight rate, but the mortgage market moves on anticipation. The moment the Fed signals a pivot — a softened statement, a dissenting vote, a dot plot that shifts dovish — the 10-year Treasury yield follows, 30-year mortgage rates track it down, and millions of homeowners who bought or refinanced at 7%-plus suddenly have a reason to call their lender. That call is the business model.
Mortgage originators earn a gain-on-sale spread: the difference between what it costs to fund and package a loan versus what investors pay for that loan on the secondary market. Volume is the multiplier. In a rising-rate environment, origination dries up and margins compress. A rate-cut cycle does the opposite — it unlocks a massive pent-up refi pool built during the 2022–2023 rate surge and simultaneously pulls fence-sitting purchase buyers off the sidelines.