The Federal Reserve is no longer actively shrinking the total securities portfolio in the same way it was during quantitative tightening. But it is still stepping away from agency mortgage-backed securities. That distinction matters for anyone trying to understand whether mortgage rates should move lower or higher.

As of the latest H.4.1 release available on April 27, 2026, the Fed reported $1.993 trillion of mortgage-backed securities held outright on April 22, 2026. That was down about $192 billion from April 23, 2025. The Fed is still a massive holder of agency MBS, but it is not acting like a marginal buyer of new mortgage production. The current instruction is to reinvest principal payments from agency securities into Treasury bills, not back into MBS.

That is mildly upward pressure on mortgage spreads, all else equal. It does not automatically mean higher mortgage rates, because mortgage rates also depend on Treasury yields, inflation expectations, recession risk, volatility, bank demand, foreign demand, REIT demand, and lender margins. But it does mean one historically powerful source of mortgage demand is still fading.

The short version: the federal funds rate is an overnight bank funding rate. A 30-year fixed mortgage is a long-duration, prepayable, securitized consumer credit instrument. The first rate can fall while the second stays sticky if long Treasury yields, MBS spreads, volatility, servicing economics, guarantee fees, and lender margins do not move with it.

That is what has happened. The Fed lowered the policy rate by 75 basis points in the second half of 2025, then held the target range at 3.50% to 3.75% at the March 17-18, 2026 FOMC meeting. Freddie Mac's 30-year fixed-rate mortgage average was still 6.23% for the week ending April 23, 2026. The 10-year Treasury yield, the cleaner anchor for 30-year mortgage pricing than the fed funds rate, was around 4.26% on April 14, 2026.

Mortgage rates have moved down from their 2023 peaks, but not in lockstep with the Fed. The gap is the mortgage market telling buyers that the price of long-term, refinanceable credit is still high.