Fed again keeps rates steady in July, but how will that affect mortgage rates?

Fed again keeps rates steady in July, but how will that affect mortgage rates?

The Federal Reserve voted to again hold interest rates steady at its meeting which concluded Wednesday, July 29.

Mortgage rates are expected to remain about where they are after Chairman Kevin Warsh’s second meeting leading the nation’s central bank. Though he has said he favors lowering rates, the Fed board that includes Warsh voted 9 to 3 to keep interest rates where they were. The three dissenting governers voted to raise the rate by 0.25%.

This is the Fed’s fifth consecutive hold on rates this year and comes after the Fed announced interest rate cuts at its last three meetings of 2025. The federal funds rate will stay at the 3.5% - 3.75% range set during the December meeting.

The Federal Open Market Committee, which votes as a body on raising or lowering rates, is expected to meet again on  September 15-16. This will be the sixth of eight meetings this year.

President Donald Trump nominated Warsh in March to replace outgoing Chairman Jerome Powell, who remains on the board as one of 12 voting governors.

What does this mean for home loans?

The announcement from the Fed means that the cost to borrow money, including for mortgages, could stay about the same. This isn’t bad as mortgage interest rates have dropped this year and are still slightly lower than they were at the same time last year.

A majority of experts are currently expecting the Fed to raise rates before the end of the year.

How does this affect homeownership?

The Fed’s decisions on interest rates can influence almost every aspect of the economy. After the Fed cut interest rates in December, mortgage rates saw a drop. And interest rates do affect the bond market, which in turn can influence mortgage rates as well.

There are a few scenarios that could be at play:

If investors believe the Fed has done enough to curb 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 the Middle East conflict and other geopolitical issues. That has the potential to push rates higher.

The bottom line is, if you need to buy a home, you should buy a home. No one knows for certain when the Fed will cut interest rates again or when mortgage rates could drop. With many experts believing that the Fed will increase interest rates before the end of the year, mortgage rates may rise in response . If rates drop after you purchase your home, you could always refinance to match lower rates.

The team at Rate 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.

Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.

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