The Federal Reserve held its benchmark interest rate at 3.75 percent to 4 percent Wednesday. Housing economists said the pause will do little to lower mortgage rates, which have topped 7 percent since late September, with another hike expected in December.
The Federal Open Market Committee voted 10-2 to keep the target range unchanged, according to a statement. Fed Governor Lisa Cook and Cleveland Fed President Beth Hammack dissented, preferring a quarter-point increase.
“Inflation remains elevated,” the committee said in the statement. “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal.”
Jeff Ostrowski, a housing market analyst at Bankrate, said in commentary that mortgage rates rose more than the Fed’s quarter-point September hike in the month that followed.
“The Fed doesn’t control mortgage rates,” Ostrowski said. “The lesson? Mortgage rates move with 10-year Treasury yields, not the federal funds rate.”
The 30-year fixed-rate mortgage averaged 7.32 percent the week of Oct. 22, according to Freddie Mac. That was down from 7.4 percent a week earlier and up from 6.19 percent a year earlier. Freddie Mac releases its next weekly survey Thursday.
Sam Williamson, a senior economist at First American, said in commentary ahead of the meeting that rising long-term inflation expectations could lead some policymakers to push for another hike and dissent if the committee voted to pause.
“While long-term inflation expectations remain broadly anchored, the Fed’s concern is that persistently high inflation could foster an inflationary mindset,” Williamson said. “Workers may seek larger raises, while businesses raise prices in anticipation of higher costs, creating a cycle that keeps inflation elevated.”
Williamson said buyers should not expect the Fed’s decision to move mortgage rates in the near term.
“Whether the Fed hikes or holds this month, homebuyers shouldn’t expect a big change in mortgage rates,” he said. “With another hike widely expected in December and further increases possible next year, borrowing costs are likely to remain elevated, keeping many buyers and sellers on the sidelines. But not everyone has the luxury of waiting. New jobs, growing families and other life events will keep some buyers moving forward, even as higher rates delay moves that can wait.”