Fed keeps rates steady after September hike, but how will that affect mortgage rates?

The Federal Reserve voted to hold interest rates steady at its October meeting, which concluded Wednesday, Oct. 28.

Mortgage interest rates are expected to remain about where they are now after the Fed's vote in September to raise rates by 25 basis points.

The federal funds rate will stay at the 3.75%-4% range set during the previous month's meeting.

The Federal Open Market Committee, which votes as a body on raising or lowering rates, is expected to meet again Dec. 8-9. This will be the final meeting of eight meetings this year.

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 for the time being.

However, some experts expect the Fed to recommend another increase in rates by the end of the year to try to combat stubborn inflation.

How does this affect homeownership?

The Fed’s decisions on interest rates can influence almost every aspect of the economy. After the Fed increased interest rates in September, mortgage rates saw a slight jump. And interest rates do affect the bond market, which in turn can influence mortgage interest 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 more seriously into focus, particularly as it relates to increases in costs due to the Middle East conflict and the general rise in consumer prices. 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 boost or 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.

Also, if you know you need to start the homebuying process, we can assist you in getting a mortgage pre-approval.

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.

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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