The Federal Reserve’s decision to leave its benchmark interest rate unchanged yet again will likely leave mortgage rates hovering near their current level as the spring homebuying season gets underway.
The Fed’s decision on Wednesday was widely expected, but confirmed the central bank’s intention to remain on the sidelines for now, as economic uncertainty and stubborn inflation data make the future path for rate policy uncertain.
The Fed’s overnight interest rate has now remained unchanged at a range of 4.25% to 4.5% since mid-December, after the central bank made no move at its meeting in January or on Wednesday.
Meanwhile, mortgage rates have hovered in a narrow band in the upper 6% range since the beginning of the year, although they remain well above the two-year low reached in September, when the Fed began cutting.
“The Fed’s policy rate remains a whole percentage point lower since its big, initial cut in September. Yet in that time, economic and policy changes have caused views about what’s ahead for the economy to fluctuate widely, and interest rates reflect this uncertainty,” says Realtor.com® Chief Economist Danielle Hale.
The Fed’s decision to stand pat comes as Chair Jerome Powell and his fellow policymakers watch cautiously to gauge the impact of President Donald Trump’s fiscal policy and tariffs, which have roiled the stock market and increased uncertainty about the economy.
The central bank sets short-term interest rates but does not directly control mortgage rates, which tend to move in tandem with the yields on long-term bonds.
Those long-term rates are dependent on investor expectations about the future state of the economy, government deficits, and Fed policy down the road.
With no change to the Fed’s policy rate at its latest meeting, bond markets will be closely watching the central bank’s updated summary of economic projections, which was released with the rate decision.
Although the Fed’s decision removes monetary policy from the mortgage rate story for the time being, mortgage rates could sill rise or fall in the coming weeks in response to new economic data.
Treasury Secretary Scott Bessent has said that both he and Trump are focused on bringing down long-dated bond yields, which would result in lower mortgage rates.
But absent policy changes from the Fed, the mechanisms for lowering long-term borrowing costs are complex: A recession would do the trick, as would a sharp reduction in government deficits or rapid cooling of inflation.
Mortgage rates reached their recent peak just above 7% in mid-January, but since then they have trended down slightly due to uncertainty over Trump’s erratic tariff agenda and growing fears of a recession.
Rates on 30-year fixed home loans last averaged 6.65% for the week ending March 13, according to Freddie Mac.
“While the idea of interest rates coming down is appealing to many consumers and businesses, the reason for lower interest rates is very important,” says Bankrate Chief Financial Analyst Greg McBride.
“We want interest rates to decline because inflation declines, not because of economic weakness,” he adds. “The recent drop in mortgage rates was fueled by concerns of economic weakness, so be careful what you wish for.”
