The Fed Held Rates Steady. What Does That Mean for Mortgage Rates?

If you were hoping the Federal Reserve's July meeting would finally bring a big drop in mortgage rates, that didn't happen. At its July 28–29 meeting, the Federal Reserve decided to hold its benchmark interest rate steady. And while that wasn't necessarily a surprise, there was plenty for the housing market to pay attention to.

Inflation is still running above the Fed's 2% target, and higher energy prices have added another complication. With continued uncertainty overseas and inflation still a concern here at home, the Fed isn't ready to declare victory and start bringing rates down.

Interestingly, though, they didn't raise rates either. So where does that leave mortgage rates?

The Fed Doesn't Actually Set Mortgage Rates

This is probably one of the biggest misconceptions we hear whenever there's a Fed meeting. The Federal Reserve does not directly set the rate you'll get on a 30-year mortgage.

Mortgage rates are much more closely tied to the bond market, particularly longer-term Treasury yields, and what investors believe is going to happen with inflation and the economy. That's why you can occasionally see mortgage rates fall after the Fed holds rates steady or even move higher after the Fed cuts rates.

The announcement itself matters, but what the financial markets think the announcement means for the months ahead can matter even more.

Why Mortgage Rates Are Still Bouncing Around

Right now, there are a lot of competing forces affecting rates.

Inflation remains higher than the Fed would like. Energy prices have been volatile. Global events continue to create uncertainty. Meanwhile, every new inflation report, employment report and piece of economic data gives investors another reason to adjust their expectations.

The result for homebuyers has been a mortgage market that can change quickly. That's also why waiting for one particular Fed meeting to suddenly make homes significantly more affordable can be a frustrating strategy.

There's rarely a single announcement that changes everything overnight.

What Should Buyers Do Right Now?

If you're thinking about buying a home, this doesn't mean you should ignore mortgage rates. Your interest rate has a very real impact on your monthly payment and purchasing power. But your decision probably shouldn't come down to trying to perfectly predict where rates will go next.

Instead, find out what buying looks like with today's numbers. Talk to a lender. Get pre-approved. Look at the payment you're comfortable with. Then see what homes are available within that budget. If rates eventually come down, refinancing may be an option depending on your circumstances. If rates move higher, you'll be glad you didn't spend months sitting on the sidelines waiting for a drop that never came.

Either way, you're making the decision based on your finances and your goals instead of trying to time the Federal Reserve.

What Does This Mean for Sellers?

Sellers should be watching rates too, because affordability has a direct impact on the pool of buyers who can purchase your home. But higher mortgage rates haven't eliminated demand.

People still move because they get married, have children, change jobs, need more space, downsize or simply reach a point where their current home no longer works for them. The difference in this market is that buyers tend to be much more conscious of price and monthly payment. That makes pricing and positioning a home correctly from the beginning especially important.

We're Watching What Happens Next

For now, we expect mortgage rates to continue moving around as the market reacts to inflation, economic data and developments overseas. We'll keep watching those changes closely because they matter for both buyers and sellers throughout Maryland, Virginia, West Virginia and Pennsylvania.

If you're considering a move, you don't have to wait for the Fed to tell you what to do. We can look at today's market, today's rates and your specific situation and help you figure out whether making a move makes sense right now.