As expected, the Federal Reserve Board maintained its current policy rate at its May meeting. Despite recent positive indicators, the Board took a wait-and-see approach to rate cuts due to increased uncertainty about the economic outlook.

What exactly did the Fed say?

The Fed’s statement described solid labor market conditions and slightly elevated inflation but emphasized growing risks in both areas. These risks present unique challenges in that growth in unemployment would dictate cuts yet also exacerbate inflation, which would usually result in rate increases. The statement reiterated that future action will be based on 'incoming data, the evolving outlook, and the balance of risks.' 

What does this mean for mortgage rates?

The Fed does not directly control mortgage rates. Investors had already priced in the Fed's decision, so geopolitical and economic events are more likely to have an impact at this time. 

Should you wait for potential future cuts before making your move? Here are some considerations:

• At this point, we cannot rely on Fed actions to lead to a rate drop in the near future, though economic data could spur changes in either direction.

• If you can afford to purchase at today's rates, you may save money by doing so, since home prices are likely to rise while you wait for lower rates.

• If you're currently renting, you could purchase instead and start building equity in a home of your own.

Getting started now with a pre-approval can put you at the starting line when you’re ready to make a move. It's worth a chat.

We have calculators to help you weigh the potential costs when buying at a higher rate or a higher price.

We also have mortgage programs that can help mitigate higher rates. An ARM, for example, offers a lower initial rate before adjusting to fixed rates later. Fixed rate buydowns and HELOCs can help you move forward with your plans, too.

If you want to wait on your next purchase, this is a good time to prepare. A qualification consultation or even a pre-approval is a great place to start.

Background on the Fed:

• The Federal Reserve Board (the Fed) controls the federal funds rate and discount rate, which are charges for overnight loans from bank to bank or from the Fed to member banks.

• This rate was lowered to near zero in March 2020 in response to the pandemic. 

• The Fed has a standing inflation target of 2%. When historic inflation hit in March 2022, they began a cycle of rate increases to slow spending and bring it down.

September 2024 brought the first policy rate cut since the initial change in 2020, with two cuts following in November and December.

Bottom Line:

If this is your time to buy, refi, or access cash from equity, don't let uncertainty about rates slow you down. We're here to help, and we're closing loans every day! 888-616-9885.