Housing News

The Fed Didn’t Lower Rates—But Mortgage Rates May Still Fall This Year

Mortgage rates won’t be heading south just yet, but could be poised to come down this fall.

Despite mounting pressure from President Donald Trump and his administration, the U.S. Federal Reserve voted to keep interest rates unchanged. This means mortgage interest rates are likely to stay high through the summer.  

However, homebuyers and homeowners hoping to refinance may be rewarded this fall. The Fed is widely expected to lower rates twice this year, beginning in September. 

“The market is somewhat expecting two moves,” said Jason Obradovich, chief investment officer at New American Funding. “Anything less would really harm rates.”

Mortgage rates averaged 6.74% for 30-year, fixed-rate loans in the week ending July 24, according to Freddie Mac data.

The Fed’s rates are separate from mortgage rates, but the two typically move in the same direction. So, if the Fed lowers its short-term interest rates, mortgage rates are likely to tumble.

Higher rates are the main weapon in the Fed’s arsenal to combat inflation. While inflation has come down, the Fed is waiting to see how tariffs will affect prices.

Generally, the Fed doesn’t slash rates unless the economy is in trouble.

“The economy seems very strong, tariffs don’t seem to be the inflationary threat, so the [Fed] really doesn’t have cause to move rates yet,” said Obradovich.

As long as inflation doesn’t shoot back up, financial experts anticipate the Fed will bring rates down later this year. 

Lower mortgage rates could make it possible for more buyers to achieve homeownership as it would lower the cost of borrowing the money needed to buy a home.

“Affordability remains a persistent challenge in the housing market, even as inventory rises and home price growth slows—or declines—in some markets,” said First American Senior Economist Sam Williamson in a statement. “Because housing is highly sensitive to interest rates, even modest shifts in monetary policy can have an outsized impact on buyer demand and affordability.”

The Fed doesn’t have to lower interest rates for mortgage rates to fall. If investors are confident the Fed will reduce rates, then mortgage rates are likely to decline.

That could give the housing market a boost.

“While we still expect the Fed to cut rates before year-end, buyers could see rate relief and improved affordability even earlier,” said Williamson.