Housing News

The Fed Isn’t Cutting—or Hiking—Interest Rates. Is That Good for the Housing Market?

The U.S. Federal Reserve announced it would leave interest rates unchanged at its April meeting.

Many had hoped the Fed would lower its short-term interest rates, which would put downward pressure on mortgage rates. This would make purchasing a home or refinancing an existing home loan more affordable.

While mortgage rates are separate from the Federal Funds rate, they generally move in the same direction. So, if the Fed appears poised to cut interest rates, mortgage rates often come down.

The Fed hikes interest rates to curb inflation and lowers rates to stimulate the economy. The war in Iran has pushed up energy prices, sparking fears of prolonged inflation.

“The [Federal Reserve] will keep rates steady due to the uncertainty around the Middle East and specifically oil prices,” said New American Funding Chief Investment Officer Jason Obradovich.

Mortgage rates briefly fell below 6% in late February before the war began, but then they rose to the mid-6% range.

But they have been steadily declining this month, averaging 6.23% for 30-year, fixed-rate loans in the week ending April 23, according to Freddie Mac data. That was down from 6.81% a year earlier.

That more than a half-a-point difference can lower monthly mortgage payments for homebuyers as well as those who refinance their loans.

“Housing is likely to hold steady with rates sitting just above 6%,” said Obradovich.

He doesn’t expect the Fed to cut rates until the fall at the earliest.

“I don’t see the [Fed] moving until September or later with the Middle East conflict still up in the air as it pertains to its duration,” said Obradovich. But if oil prices drop and unemployment rises, “then we could see the [Fed] move rather quickly.”