Prime, Fed Funds, SOFR, 10-Year Treasury: The Benchmark Behind Every Rate You Pay or Earn
Almost every rate you pay or earn is a benchmark plus a margin. Here's which benchmark sits under each account, why they moved differently after the September hike, and the part of the rate you can actually change.
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📐 Figures verified Sep 27, 2026 against the Federal Reserve's September 16 statement and implementation note, the H.15 release and daily SOFR and 10-year Treasury data; benchmark values are dated, since they move every business day. How we check numbers →
Most rates are a benchmark plus a margin. Credit cards and HELOCs follow the prime rate, which moves with the Fed's target. Adjustable mortgages and variable-rate private student loans follow SOFR. Fixed mortgages track the 10-year Treasury, which the Fed doesn't set. Savings rates follow short-term rates loosely. The benchmark is the same for everyone; the margin depends on you.
Numbers That Matter
| Figure | Amount | Source | Verified |
|---|---|---|---|
| Federal funds target range | 3.75%–4.00%, raised a quarter point on Sep 16, 2026 | FOMC statement | Sep 27, 2026 |
| Interest on reserve balances | 3.90% | Fed implementation note | Sep 27, 2026 |
| Bank prime loan rate | 7.00% from Sep 17, 2026 (was 6.75%) | Fed H.15 | Sep 27, 2026 |
| SOFR | 3.88% on Sep 24, 2026 (3.62% on Sep 16) | NY Fed via FRED | Sep 27, 2026 |
| 10-year Treasury yield | 5.01% on Sep 16, 2026 | Fed H.15 via FRED | Sep 27, 2026 |
| Federal student loan rates | Set each year from the May 10-year Treasury auction plus a fixed add-on | StudentAid.gov | Sep 27, 2026 |
| Next FOMC decision | Oct 28, 2026 | FOMC calendar | Sep 27, 2026 |
Which Benchmark Sits Under Which Rate
Lenders rarely invent a rate from scratch. They start from a public benchmark and add a margin for their costs, their risk and your credit. Knowing which benchmark sits under each account tells you when your rate will move and whether a Fed decision matters to you at all.
| Product | Benchmark | When your rate moves |
|---|---|---|
| Credit card (variable APR) | Prime rate | Usually within a billing cycle or two of a prime change |
| HELOC | Prime rate | Usually the next billing cycle |
| Adjustable-rate mortgage | Usually a SOFR average | At each scheduled reset, within the loan's caps |
| Variable-rate private student loan | Usually SOFR | Monthly or quarterly, as the note says |
| Fixed-rate mortgage | 10-year Treasury, plus a spread | New loans only; yours is locked |
| Federal student loan | 10-year Treasury auctioned in May | New loans each July 1; existing rates stay fixed |
| Savings and money market accounts | Short-term rates, loosely | Whenever the bank decides |
| Money market funds and Treasury bills | Short-term market rates | Within days to weeks |
| CDs | Treasury yields of a similar term | New CDs only |
Fed Funds: The Rate the Fed Actually Sets
The federal funds rate is what banks charge each other for overnight loans. The Federal Open Market Committee sets a target range, 3.75%–4.00% since its September 16 decision, and steers the market into it with the rates it pays: 3.90% on the reserves banks keep at the Fed, and an overnight reverse repurchase rate at the bottom of the range. You will never borrow at the fed funds rate, but every short-term rate in the economy orbits it.
Prime: Fed Funds Plus Three
By long-standing convention, big banks set their prime rate 3 percentage points above the top of the fed funds range, and the Fed publishes it in its H.15 release. Prime moved to 7.00% on September 17, the day after the hike. Credit cards and HELOCs are priced as prime plus a margin, which is why their rates move almost in lockstep with the Fed. What the September hike changed walks through the dollar effect on each account.
SOFR: The Benchmark That Replaced LIBOR
The Secured Overnight Financing Rate measures the cost of overnight loans backed by Treasury securities, and the New York Fed publishes it every business day. It replaced LIBOR in U.S. contracts, with the last legacy LIBOR loans switching after June 30, 2023. SOFR follows the Fed closely: it went from 3.62% on September 16 to 3.85% the next day and 3.88% by September 24. Adjustable mortgages and variable private loans usually use an average of SOFR over 30 or 90 days, so they catch up with a lag.
The 10-Year Treasury: The Rate the Fed Doesn't Set
Investors set the 10-year Treasury yield by trading the notes. It reflects where they expect short-term rates to go over a decade, what they expect inflation to be and the extra return they want for tying money up that long. It was 5.01% on September 16. Fixed mortgage rates track it plus a spread, and new federal student loan rates are set from the May auction of the 10-year note. A Fed hike can push it up, leave it flat or even pull it down, depending on what investors expect next.
Worked Example: What the Margin Costs
- A $50,000 HELOC: at prime plus 0.25 (7.25%), a year's interest is $3,625; at prime plus 1.50 (8.50%), it is $4,250. The margin gap costs $625 a year.
- A $5,000 card balance: at prime plus 12 (19.00%) versus prime plus 18 (25.00%), the interest is $950 versus $1,250: $300 a year.
- A $30,000 variable private student loan: at SOFR plus 2.50 (6.38%) versus SOFR plus 6.00 (9.88%), the interest is $1,914 versus $2,964: $1,050 a year.
- The hike in context: the September move added 0.25 points to both HELOC offers, $125 a year on $50,000, which is a fifth of the gap between the two margins.
A year's interest on the full balance, before compounding. Margins are illustrative; prime and SOFR as of the dates in the table. The Kim household is an illustration.
The Part You Control
You can't move the benchmark, but the margin is priced on you. Lenders set it from your credit score, how much you borrow against what you own, the term and how hard you shop. Compare offers on the index and the margin rather than an introductory rate, ask your card issuer for a lower APR after a stretch of on-time payments, and read an adjustable loan's caps and reset dates before you sign. For cash, check what Treasury bills and money market funds pay before you accept a savings rate that barely moved.
Decision Rules
If this, then that
- If you carry a card balance → the benchmark just rose and your margin won't fall on its own; pay it down or move it.
- If you have a HELOC → your rate follows prime; budget for another change after the next FOMC meeting.
- If you are shopping for a fixed mortgage → watch the 10-year Treasury, not the Fed's decision day.
- If you have a variable-rate private student loan → check the index and reset dates in your note, and price a fixed-rate refinance.
- If you keep cash in savings → compare your rate with Treasury bill and money market fund yields; banks pass increases through slowly.
Mistakes to avoid
- Thinking the Fed sets mortgage rates.
- Comparing loan offers on the rate alone, without the index and margin.
- Expecting your savings rate to rise the day the Fed hikes.
- Ignoring an adjustable loan's caps and reset dates.
- Accepting a high card margin because rates are high for everyone.
Related: the Fed just raised rates shows what the hike did to each account; which inflation number matters explains the PCE gauge behind Fed decisions; and home equity loans vs HELOCs compares fixed and prime-based home borrowing. More guides are in the Economy, Rates & Inflation hub.