Mortgage rates remain in a volatile range despite the Fed’s decision to keep short-term interest rates unchanged. Analysts expect modest declines in mortgage rates, but uncertainty looms as economic policies—including tariffs—could keep inflation stubbornly high, limiting the Fed’s ability to cut rates later this year.
“In the past year, mortgage rates have traded in a wide range from a 7.25% peak in March 2024 to a floor of 6.125% in September 2024 to 6.625% now,” said Geno Paluso, the CEO of Sagent Mortgage Technologies. “This volatility will continue as inflation versus recession debates play out.”
Mortgage rates should trend down modestly from current levels, added a multi-analyst post-meeting commentary from Keefe, Bruyette & Woods.
“We also expect 10-year Treasury yields to trend down modestly and would anticipate some narrowing of spreads between agency mortgage-backed securities and Treasuries,” KBW said. “The higher-for-longer rate outlook remains positive for mortgage servicers (Mr. Cooper/Pennymac/Rithm) and on a relative basis for mortgage insurers.”
But for originators and title insurers, whose earnings are more dependent on where mortgage rates are, the environment for 2025 remains challenging, KBW said
The Freddie Mac Primary Mortgage Market Survey for March 20, which uses data from applications submitted to its automated underwriting system, only covers a brief window following the Fed announcement.
For the second week in a row, the 30-year fixed rate mortgage rose, this time by 2 basis points to 6.67%, Freddie Mac said. But it makes nine weeks where the rate has been under 7%, Sam Khater, chief economist, noted.
The 15-year FRM was up 3 basis points from March 13, to 5.83%.
A year ago at this time, the 30-year FRM was 6.87% and the 15-year was 6.21%
“It’s encouraging to see mortgage rates stay below 7%, and current coupon MBS spreads grounded near 140 basis points over Treasuries, but interest rate volatility needs to fall further for mortgage rates to hold below 6.5%,” said BTIG analyst Eric Hagen in his March 19 roundup.
“We still see some lenders offering interest rate buydowns, but the value is burning out to some degree because stocks seem to get only limited credit/upside from clearing a low bar for origination estimates, especially while gain-on-sale margins are still hovering near trough levels.”
The 10-year Treasury yield, a benchmark for pricing mortgages fell from 4.32% before the announcement to a close of 4.26%. It was down to 4.21% as of 11 a.m. Thursday morning. Lender Price data posted on the National Mortgage News website for the same time had the 30-year FRM at 6.763%, compared with 6.815% a week ago.
Zillow’s mortgage rate tracker was at 6.51% for the 30-year FRM at that time, down 6 basis points from Wednesday. But as a sign of where rates had been trending before the FOMC meeting, it is still 9 basis points higher than last week’s average of 6.42%.
As the Fed holds rates steady, economists are watching how the Trump Administration’s policies—including tariffs and federal layoffs—will influence inflation and mortgage markets. Kara Ng, senior economist at Zillow Home Loans, notes that the central bank remains in a wait-and-see mode.
“No news seems to be good news for the markets, as evidenced by a rise in stock prices and a decline in Treasury yields and mortgage rates following the FOMC meeting,” Ng said.
But Ng is in agreement with those who say mortgage rates are not guaranteed to fall much further from where they are right now.
“There is a risk that potential homebuyers and sellers may also adopt the Fed’s wait-and-see approach if they do not feel secure enough in their financial situations to make a move,” Ng said. “Historically, though, changes in mortgage rates have had a more significant impact on housing demand and home values than fluctuations in wages, unemployment, and financial wealth.”
Mortgage Bankers Association Chief Economist Mike Fratantoni said the Fed put out “a weaker outlook for economic growth and the job market but somewhat higher inflation for the near term compared to their forecasts in December. The statement indicates more concern about weaker economic growth, but its outlook for the federal funds target is unchanged.”
The impact of tariffs
Tariffs implemented by the Trump Administration could reignite inflation, making future Fed rate cuts unlikely, said Melissa Cohn, regional vice president of William Raveis Mortgage.
“Tariffs, massive federal layoffs, and immigration policies — it’s hard to look at historical data as a base for future Fed predictions,” said Cohn. “What happens in the economy in the next three months will be the driver of future rate movement from the Fed.”
The Fed’s war on “stubborn inflation” affects the day-to-day lives of Americans, said Voxtur CEO Ryan Marshall.
“On top of this, the Fed now has to look closely at any tariff-related price increases, which would also keep interest rates higher for longer,” Marshall continued. “That said, as the economy seems to continue its so-called ‘soft landing,’ we expect mortgage rates to drift lower through the summer gradually, but not by more than a percentage point.”
But while Fed Chairman Jerome Powell was of the view that any inflation would be transitory, Nigel Green, CEO of financial advisory the deVere Group, said this assumption was flawed.
“History teaches us that, once embedded, inflation is notoriously difficult to reverse,” Green said. “History shows that businesses and workers alike adjust their expectations when costs rise.”
