Fed Holds Rates, But Mortgage Rates Still Won’t Budge | Mortgage Rates, Home Loan Guides & Expert Insights

Key Takeaways:

• The Federal Reserve announced its latest interest rate decision
• According to Mortgage News Daily, mortgage rates are around 6.55% for a 30-year fixed.
• The Fed’s announcement hints at its future interest rate path
• Consider locking in your rate now. markets are uncertain and today’s exchange rates already reflect current expectations

The Fed is holding interest rates steady

The Federal Reserve kept its benchmark interest rate unchanged at its June meeting, keeping the federal funds rate at current levels.

The decision was long awaited. But “anticipated” doesn’t mean unimportant, especially if you’re shopping for a mortgage right now.

Mortgage rates rose slightly on the news. As of Wednesday afternoon, the average 30-year fixed rate was 6.55%, according to Mortgage News Daily. That’s roughly in line with last week’s Freddie Mac average of 6.52%.

In other words, interest rates don’t move much. They’re parked in the mid-6s, waiting for a clearer signal from the Fed about when cuts might actually arrive.

If you’ve been sitting on the sidelines waiting for prices to drop, here’s the reality. middle 6s might be as good as it gets for a while. Now may be the time to lock in before the market moves.

Why did the Fed stop and what does one word tell you?

The Fed’s announcement points to two persistent realities: inflation that won’t stop and a labor market that’s softening.

CPI inflation was 4.2% year-over-year in May, more than double the Fed’s 2% target. At the same time, unemployment has reached 4.3%, which is creeping in the wrong direction.

That puts the Fed in an awkward position. Cut interest rates and risk fueling inflation. The rate of increase and the risk of tipping the labor market over the cliff.

So the Fed chose door number three: do nothing.

From the announcement.

The Committee finds that the risks to achieving its employment and inflation targets have become more uncertain.

A statement from the last meeting said those risks were “roughly balanced.” Now they have become “more vague”.

What is the difference between the two words? A lot when those words come from the US central bank.

“Roughly balanced” means the Fed feels comfortable. It sees a clear path. “More uncertain” means the Fed is flying with a foggier windshield. He doesn’t know which risk – sticky inflation or rising unemployment – will win out.

In plain English, the Fed simply admitted that it doesn’t have clear information on where the economy is headed.

The decision was unanimous. No dissent. That tells you that the entire committee agrees that this is a wait-and-see moment.

Since this was a projection meeting, the Fed also released its updated dot plot, a chart showing where each official expects rate cuts over the next few years. If you’re buying a mortgage, that dot plot is more important than today’s savings. It’s the closest thing you get to a road map of where prices are headed.

Selma Happ, Chief Economist of real estate data company Cotality, noted.

Where do mortgage interest rates come from?

Today’s updated dot plot is the segment to watch. It’s a chart showing where each Fed official expects rates to go over the next few years, the closest thing to a crystal ball the Fed offers. With the forecast now in place, the path ahead is a bit clearer than it was yesterday.

But with inflation still hovering at 4.2%, more than double the Fed’s 2% target, don’t expect any dramatic pivots. The Fed has made it clear that it wants to see steady progress in prices before it cuts.

4.3% unemployment gives the Fed some cover. The labor market isn’t collapsing, which means the Fed can afford to be patient.

Here’s how the next few months could play out.

Scenario 1: The Fed holds its next meeting again. This is the base case. If inflation remains sticky and jobs remain strong, then the Fed remains tight-lipped. Mortgage rates are likely to remain near current levels.

Scenario 2: Forecasts bend into the devil. If the dot chart shows enough Fed officials penciling in a rate cut later this year, markets will react before the Fed actually does anything. Rates can improve, and just 0.25% down saves you $49 per month on a $300,000 mortgage.

Scenario 3: Inflation picks up again. If the CPI is higher, the Fed could be signaling that more hikes are off the table. That would quickly raise mortgage rates. A quarter point increase adds $50 per month to that same $300,000 loan.

The dot plot shows which way the Fed is leaning. But you don’t have to wait for the next meeting to act. Now may be the time to lock in as long as prices remain stable.

Bankrate senior analyst Andrew DeHaan noted. “Lenders base interest rates not just on your personal financial profile or the current market, but also on their business needs.”

What are today’s mortgage rates?

Thirty-year fixed rates are now near 6.55%, according to Mortgage News Daily. That’s still competitive by recent standards. But markets can move without notice, and today’s exchange rate can look like a deal a month from now. If you find a rate that fits your budget, lock it in before the window moves.