Housing News

The Fed Left Interest Rates Unchanged. Does That Mean Mortgage Rates Will Rise or Fall?

Mortgage interest rates may remain higher for longer than many would prefer as the impact of the war in Iran and elevated energy prices continues to play out.

The U.S. Federal Reserve voted to hold interest rates steady at its July meeting, but the central bank is expected to hike rates at least once this year. That’s likely to keep upward pressure on mortgage rates.

Mortgage rates are separate from the Federal Funds rate that the Fed sets. But the two rates typically move in the same direction. So, if the central bank indicates that it’s likely to increase the Federal Funds rate, then mortgage rates are likely to rise.

“I expect the Fed to raise interest rates one time in 2026 to signal…that they are serious about controlling inflation,” Jason Obradovich, the chief investment officer at New American Funding said in a statement.

“Ultimately this could actually give [investors] more confidence in the Fed and actually could bring long-term rates (and mortgage rates) down,” said Obradovich.

The Fed typically raises interest rates to combat inflation and lowers rates to give the economy a jolt when unemployment rises.

The war in Iran has led to higher oil prices, which is expected to result in higher inflation.

“There is a lot of pressure on the Fed to contain inflation, which would might require it to raise interest rates to slow down the economy,” said Obradovich.

Mortgage rates averaged 6.58% for 30-year, fixed-rate loans in the week ending July 23, according to Freddie Mac data. That was a slight bump from earlier in the month but was down from an average of 6.74% a year earlier.

Elevated mortgage rates could help homebuyers who can afford the higher borrowing costs, as they may find more homes for sale and less competition in the housing market. That could keep a lid on prices as more sellers cut prices and there are fewer bidding wars to drive them back up. 

“Higher rates and an economy slowing down would be more beneficial to buyers,” said Obradovich.