Forget the Fed — one number nobody’s watching is now driving your mortgage rate, your car loan and your portfolio. Here’s how to get ahead

Last month, the Federal Reserve raised its benchmark interest rate for the first time since 2023, from 3.75% to 4%, in an effort to combat inflation. Higher rates are designed to slow consumer spending, which in turn can slow inflation.

This can influence short-term interest rates, like credit cards. But if you’re planning to buy a house or a car, it’s not the only number that matters.

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The 10-year Treasury yield — the return that investors get for lending money to the federal government — can have a real impact on your finances, since it can influence longer-term borrowing costs.

“Even in the face of a historic stock market rally and bond market pivot, the most consequential move in financial markets may just be in the relentless rise in real yields,” writes Kriti Gupta, executive director, global investment strategist, and Nick Roberts, portfolio manager, specialized strategies, with J.P. Morgan.

“Representing the true cost of capital by accounting for inflation, this has the most direct impact on businesses, consumers and governments alike.”

How Treasury yields affect consumer borrowing

While the Fed sets the national interest rate, many consumer loans — such as 30-year mortgages — tie their rates to 10-year Treasury bonds.

Long-term yields are influenced by long-term factors, such as expectations for inflation, government borrowing and economic growth — and less so by the Fed’s overnight rate.

So when Treasury yields rise in reaction to events such as war-driven inflation or a selloff in government bonds, interest rates on consumer loans tend to move higher, too.

And yields have been on the rise — hitting a 24-year high of 5.34% on the morning of Oct. 1.

The rise in Treasury yields is “just another drag for households when you’ve got affordability hits elsewhere,” Thomas Ryan, a North America economist at Capital Economics, told CNBC.

Thirty-year fixed mortgage rates tend to track the 10-year Treasury yield, since lenders need to maintain their profit margins. Higher yields bump up mortgage rates, reducing the purchasing power of homebuyers and discouraging homeowners with a low rate from selling.

As of Oct. 1, the 30-year fixed-rate mortgage averaged 7.28%, according to Freddie Mac.

“It is clear that higher rates this fall are leading to a pullback in demand,” Lisa Sturtevant, chief economist at Bright MLS, told NAR Realtor News. “Sellers are having to adjust their pricing expectations and offer more concessions to buyers.”

While auto loans aren’t directly tied to 10-year Treasury yields, rising yields still serve as a benchmark for long-term financing. In other words, rising yields can impact your car loan.

As of July, the average interest rate on a loan for a new vehicle was 9.52%, according to data from the Cox Automotive/Moody’s Analytics Vehicle Affordability Index. The typical monthly payment was $768, up 2.9% from the previous year.

Yield rates can also impact your portfolio. When bond yields rise, newly issued bonds offer higher payouts — but if you hold older bonds, their market value drops.

Read More: Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?

How this could impact your financial decisions

If you’re looking to buy a new home or refinance an existing mortgage, compare rates and fees from multiple lenders. Make a decision based on what you can comfortably afford now, rather than counting on a future refinance.

A common rule of thumb is to spend no more than 30% of your income on housing, which includes your mortgage, property taxes, home insurance and utilities. If your budget doesn’t allow for that, you could try to increase your income — though that’s easier said than done — or reduce your housing costs.

For example, to reduce your housing costs, you could improve your credit score and/or make a larger down payment — both of which could help you qualify for a lower interest rate. You may also have to adjust expectations, such as looking for a smaller home in a more affordable neighborhood.

If you’re looking to buy a new car, lenders will consider a number of factors when setting your rate, such as your current income, credit score, existing debts, down payment and loan term. You’ll want to shop around for rates, but improving your credit score could also help you qualify for better loan terms.

When it comes to your portfolio, there could be opportunities for bond investors.

“Higher interest rates benefit savers and investors just as much as they’re harming spenders,” Dominic J. Pappalardo, chief multi-asset strategist at Morningstar Wealth, told CNBC.

While he says it’s prudent to “tweak it to try and take advantage of that new marginal opportunity to generate more income off of bond investments,” he also advises that investors “don’t blow up everything and start from scratch.”

But if you sell older, lower-paying bonds before maturity, you could experience a capital loss.

If you’re not sure about whether to make a major purchase (like a house), if you can afford higher borrowing costs or if you should tweak your portfolio, it could be a good idea to talk to a financial advisor.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.