The Federal Reserve wrapped up its May meeting with the announcement that it would continue to hold the federal funds rate steady after first pausing its rate cuts in January. This move was expected by investors and didn't have a huge impact on mortgage rates.
Fed officials have repeatedly said that they want to wait and see how tariffs will affect the economy before they make any moves, and Fed Chair Powell reiterated this stance at his press conference following this latest meeting.
Fed policymakers cut rates by 100 basis points last year in response to slowing inflation. But tariffs are expected to push inflation up, which could keep central bankers from cutting rates much further this year. This means mortgage rates may not drop as much as initially expected.
Understanding the Federal Reserve's role in mortgage rates
The Federal Reserve's actions are a big influencer in where mortgage rates head. Here's what to know about this bank and how it plays into rates.
What is the Federal Reserve?
The Fed has two main jobs, called its "dual mandate": maintain price stability and keep unemployment low.
When the economy heats up too much, prices tend to grow faster than is healthy. When this happens, the Fed uses monetary policy tools that put downward pressure on inflation. Its primary tool for slowing inflation is the federal funds rate, which is the interest rate banks charge each other to borrow money overnight. Increasing this rate slows economic growth.
When the economy has slowed too much and needs a boost, the Fed will cut the federal funds rate to make it cheaper for banks to borrow money. During the COVID-19 pandemic, the Fed reduced rates to near zero to stimulate a struggling economy.
How Fed meetings affect mortgage rates
When the Fed decides to make changes to its benchmark rate, called the federal funds rate, it can indirectly impact the kinds of rates you're offered by mortgage lenders. This will, in turn, impact how much you pay each month for a home.
Mortgage rates don't directly follow the federal funds rate. Instead, they typically move up and down with the 10-year Treasury yield, because mortgage rates are largely influenced by investor demand.
"Fixed mortgage rates are typically set based on the yield of the 10-year Treasury bond," says Michael Gifford, CEO and co-founder of Splitero, a home equity investment company. "This bond is usually the most closely monitored by investors. As the Federal Reserve raises short-term interest rates, the yield on the 10-year Treasury bond also tends to rise. This puts upward pressure on mortgage rates. The Fed's rate hikes can also signal to lenders that inflationary pressures may be increasing, which can lead lenders to raise their interest rates in response, including mortgage rates."
To be clear: Your own personal mortgage rate will depend a lot on the circumstances of your financial profile: your credit score, debt-to-income ratio, and how much you have for a down payment. But larger rate trends in the mortgage market can be affected by a lot of different factors, including current economic conditions, inflation, the unemployment rate, and the housing market.
Recent trends in mortgage rates after Fed meetings
To see how the Fed's actions impact mortgage rates, you can look at past rate changes. See below for recent mortgage rate trends after Fed meetings:
Historical Fed meetings and mortgage rates
The Fed began raising interest rates in early 2022, in an attempt to cool high inflation. It raised rates seven times in 2022 and four times in 2023. The Fed rate was then kept steady until September 2024.
As the Fed began raising rates, mortgage rates climbed steadily. In March 2022, before the first rate increase, the average 30-year mortgage rate was under 4%. For most of 2024, it hovered between 6% and 8%.
Recent changes and trends
The Fed spent most of 2022 aggressively raising rates to try to tame decades-high inflation. In response, the consumer price index, a major measure of inflation, has come down substantially from where it peaked in June 2022. In March 2025, this index rose 2.4% year over year.
As inflation neared the Fed's target of 2%, policymakers started cutting rates. But they're keeping rates steady now as they wait to see how the economy evolves this year. This has kept 30-year mortgage rates in the mid-to-high 6% range, according to Zillow data.
What to expect from upcoming Fed meetings
Though mortgage rates don't always move in lockstep with the federal funds rate, it's a good idea to have a basic understanding of when and why Fed policy moves might impact mortgages — especially if you're planning to get a mortgage or refinance sometime soon. This means not only watching what the Fed does, but also what its officials say about future policy changes.
Upcoming Fed meetings and mortgage rate predictions
Investors still think it's likely the Fed will cut rates three or four times later this year, so it's possible we could see mortgage rates come down at some point. But this may only happen if inflation stays low or the economy starts to weaken.
Key factors to watch
Borrowers should keep an eye on the labor market and how tariffs affect the economy. If labor market conditions deteriorate, the Fed may cut rates sooner and faster than expected, even if inflation ticks up. But so far this year, the overall economy has remained strong, which means central bankers may be more willing to keep rates at their current levels while they wait to see how inflation trends.
The Fed's impact on mortgage rates FAQs
How does the Federal Reserve affect mortgage rates?
The Federal Reserve influences mortgage rates by setting the federal funds rate, which impacts borrowing costs, investor activity, and market conditions.
What happens to mortgage rates when the Fed raises interest rates?
When the Fed raises interest rates, mortgage rates often increase as well, making borrowing more expensive. Rates on other financial products, including savings accounts and Certificates of Deposit, usually rise, too.
How often does the Federal Reserve meet?
The Federal Reserve typically meets eight times a year to discuss and set monetary policy. This is when the federal funds rate can be increased or decreased.
Can Fed meetings predict future mortgage rate trends?
While Fed meetings provide insights, mortgage rates are influenced by various factors including economic data and market conditions.
Should I lock in my mortgage rate before a Fed meeting?
Whether you should lock in your mortgage rate depends on current rate trends and your own personal circumstances. Your loan officer can help you make an informed decision.
