The Federal Reserve decided to keep its overnight rate unchanged at 4.25% to 4.5%. For the first time in 30 years, two Fed members dissented, advocating for a rate cut. Political pressure, especially from Trump, is significant, as he claims inflation is under control and calls for lower rates. Current mortgage rates are stuck over 6.6%, impacting home affordability. Clarification exists that a Fed rate cut might not directly influence mortgage rates, which are linked to long-term bond yields. Projections suggest mortgage rates may ease slightly by late 2025.
The split decision comes at a time of remarkable political polarization over Fed rate policy, with Trump and his allies insisting for months that inflation is fully under control and demanding lower rates.
Mortgage rates have remained stuck above 6.6% since the beginning of the year, contributing to historically bad affordability conditions for homebuyers and severely depressed home sales activity.
Still, it's unclear whether a Fed rate cut would offer significant relief to mortgage borrowers. The Fed doesn't set mortgage rates, which instead track long-term bond yields.
'Fed rate cuts, which are expected later this year, in a steadier policy environment should help mortgage rates fall, relieving some of the strain on homebuyers,' says Realtor.com Chief Economist Danielle Hale.
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