Housing News

The Fed Left Rates Unchanged. What Does This Mean for Mortgage Rates?

Mortgage rates appear to be staying put this spring.

On Wednesday, the U.S. Federal Reserve announced it would leave its interest rates unchanged. While the Fed’s short-term interest rates are separate from mortgage rates, the two generally move in the same direction. So, when the Fed lowers rates, mortgage rates tend to follow.

Since the Fed kept rates steady, mortgage rates are likely to remain in the same range as they have been for months, at least over the short-term.

“[There] should be very little impact to mortgage rates in terms of their decision,” said New American Funding Chief Investment Officer Jason Obradovich.

Why isn’t the Fed lowering interest rates?

Despite political pressure to lower rates and stimulate the economy, the Fed has kept rates steady to combat persistent inflation and gauge the effects of the new tariffs.

“There’s just so much that we don’t know. We’re in a good position to wait and see,” said Fed Chair Jerome Powell during a press conference on Wednesday. “We don’t have to be in a hurry. The economy has been resilient and is doing fairly well. Our policy is well-positioned. The costs to waiting to see further are fairly low.”

If unemployment picks up and the economy looks likely to fall into a recession, the Fed is expected to lower rates.

“The spike in the unemployment rate is probably the most likely event that could cause a drop in mortgage rates,” said Obradovich.

The Fed is widely expected to lower rates in the second half of the year.

“[This] allows time for more data on inflation and employment to become available, not to mention it allows for more time to determine the impact the tariff situation has on the economy,” said Obradovich.

The Fed began hiking rates in early 2022 to combat high inflation. As inflation slowed, the Fed cut rates three times last year, bringing them down a full percentage point. This helped to bring mortgage rates down, temporarily, last fall.

Will mortgage rates come down in 2025?

The decision not to cut rates this month doesn’t mean that mortgage rates will stay high throughout the year.

“Mortgage rates are projected to ease from today’s levels, offering additional relief to prospective homebuyers,” said First American Senior Economist Sam Williamson in a statement.

Rates rose after new tariffs were announced. But they have been slowly ticking down over the last few weeks, according to Freddie Mac data.

“The 2025 homebuying season may still experience modest year-over-year improvement as buyers increasingly adapt to the ‘higher-for-longer’ rate environment and prioritize lifestyle factors over waiting for a significant rate drop,” said Williamson.