Fed keeps mortgage rates unchanged for a third time this year
In a move that most market analysts once again expected, the Federal Reserve announced another pause in rate changes after its May meeting that ended Wednesday. The pause mirrors similar decisions in both January and March, which were preceded last year by three consecutive cuts to the federal funds rates.
The federal funds rate will stay at the range of 4.25%-to-4.5%. The nation’s central bank did not predict whether it could cut rates by the end of the year.
The Fed also further adjusted its view of the overall economy as a key aspect behind the pause from its last meeting in March.
“Uncertainty about the economic outlook has increased further,” a statement released after the meeting said. “The committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Questions surrounding President Donald Trump’s tariff threats also pushed the Fed to express concern over consumer price increases as tariffs begin to take effect.
What does this mean?
The announcement from The Fed means that the cost to borrow money will stay about the same as it’s been since the last Federal Open Markets Committee meetings in both January and March.
The initial market reactions were mostly negative on Wednesday. The bond market dropped slightly, while stocks also dropped about 0.5% after the announcement.
How does this affect homeownership?
The Fed’s decisions on interest rates can influence almost every aspect of the economy. The last time the Fed cut interest rates, mortgage rates rose, so the two aren’t directly related. However, interest rates do affect the bond market, which in turn does influence mortgage rates.
There are a few scenarios that could be in play:
If investors believe the Fed has done enough for inflation, they could rush into the bond market and drive rates lower.
There’s also the possibility of inflation coming back into focus, particularly as it relates to increases in prices due to tariffs. That has the potential to push rates higher.
The bottom line is, if you need to buy a home, you should buy a home. If you can afford to wait, you may want to wait.
The team at Guaranteed Rate Affinity is here to help you navigate a tricky housing market. If you have questions, we have team members available to support you. Also, if you know you need to start the homebuying process, we can assist you in getting a mortgage pre-approval.
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