Digesting What The Fed Said And Did, And How It Will Impact Lending
The Fed met last week and did not signal a rate decrease. “Look at the state of the economy,” Fed Chair Jerome Powell said. “The labor work is solid, inflation is low. We can afford to be patient as things unfold. There’s no real cost to our waiting at this point.” Now that this news has settled in, here is how insiders see it impacting lending going forward:
Dr. Selma Hepp, Cotality’s Chief Economist, says, “Fed officials are signaling a wait-and-see approach to the impact global trade uncertainties will have on the US economy. The Fed is trying to straddle keeping inflation moving towards the target and ensuring employment doesn’t cool considerably more – not an easy task given the current policy context. One thing is for certain, interest rates are highly unlikely to dip down to 2021 levels, when rates hovered around 3%. We foresee a 6% mortgage rate, or higher, to be the new normal for the 30-year fixed mortgage for the next two years.”
”The best-case scenario for mortgage rates is to hover just above the 6% mark for the next two years,” agreed Victor Kuznetsov, Co-Founder and Managing Director of Imperial Fund Asset Management. “The average American household has adopted a wait-and-see strategy regarding mortgage rates, as they also seek to reduce their monthly consumer spending, amid current economic uncertainty. The good news is that employment and home prices remain strong, so families will be in a better position to buy or refinance a home in the coming months, especially if rates dip below 6%.”
So, what does this mean for the mortgage industry this year? “Due to inflation still running higher than expected, mortgage rates are likely to remain flat through the summer housing market,” predicted Ryan Marshall, CEO of Voxtur. “Furthermore, with continued uncertainty surrounding tariffs and their impact on the global economy, the bond market is facing increased volatility, which is having a destabilizing effect on mortgage investments in the secondary market. Heading into the Fall, if inflation cools as expected, mortgage rates will begin to dip slowly and steadily, finishing out 2025 around 6%.”
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