How the Fed’s vote to hold rates could affect home loans

The Federal Reserve voted to hold interest rates steady at its April meeting that ended Wednesday, and mortgage rates are expected to remain about where they are alongside the Fed’s decision.

This is the Fed’s third 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 June 16-17. This will be the fourth of eight meetings this year and the first meeting after Chairman Jerome Powell’s term ends May 15.

While the new chairman has yet to be confirmed, President Donald Trump nominated Kevin Warsh to replace Powell.

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 almost half a percent lower than the same time last year.

A majority of experts currently expect the Fed to continue to hold rates steady for the remainder 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. Interest 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 tariffs, 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. 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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