Fed Says ‘Not Yet’ to Rate Cut, Mortgage Rates Dangle Below 7%

Mortgage interest rates dipped this week and the Federal Reserve left short-term rates alone, while opening the door to cut them in the fall.

The average interest rate on the 30-year fixed-rate mortgage fell eight basis points to 6.86% in the week ending June 18, according to rates provided to NerdWallet by Zillow. A basis point is one one-hundredth of a percentage point.

Mortgage rates have not moved much in recent months, with the 30-year mortgage remaining above 6.75% since late March. It has stayed under 7% except for a three-week stretch in May when it rose as high as 7.07%.

Some of the rate stability can be attributed to the Federal Reserve. The central bank has left short-term interest rates untouched this year, including at its June 17-18 meeting. In a statement, the Fed said it would keep an eye on inflation and employment to decide what to do next — and when.

The central bank generally raises interest rates when inflation gets too high, and reduces rates when unemployment gets too high. It jacked up rates by 5.25 percentage points in 2022 and 2023 in response to inflation. Then it cut rates by a percentage point last year as inflation subsided.

But inflation is still too high for the Fed’s comfort, and the timing of the next rate cut is anyone’s guess. When you throw trade policy into the mix, the outlook is even murkier: Will tariffs kick prices higher in a one-time shock, or will they initiate a persistent spiral of rising prices and wages? “Uncertainty about the economic outlook has diminished but remains elevated,” the Fed said in its statement.

If tariffs cause a one-and-done bump in prices, the Fed might cut rates once or twice this year. But if inflation rises and sticks around, the Fed may not cut rates at all in 2025.

“Based on our own model and the central bank’s recent rhetoric, the Fed will be and should be in no hurry to cut rates given the risk around the economic outlook linked to inflation and trade policy,” Joseph Brusuelas, chief economist for RSM US, a consulting firm for medium-size businesses, wrote in a blog post.

He predicted that the Fed will cut short-term rates once this year, maybe in September but more likely in December, “because it will be some time before the Fed can ascertain the impact of trade policies on unemployment and inflation.”

In this atmosphere of stability mixed with uncertainty, mortgage rates might stay inside of a tight range until the economy swerves decisively in one direction or another: higher inflation or rising unemployment. Persistent inflation would push mortgage rates higher, while widespread job losses could pull mortgage rates lower.

With mortgage rates and home prices as high as they are, few people can afford to buy a home. Or, to be more descriptive, home sellers outnumber home buyers nationwide. That gives buyers more negotiating leverage.

In May, 1.036 million existing homes were actively listed for sale, according to stats compiled by Realtor.com. That’s a 32% increase over the number of active listings one year before. Homes that were sold in May typically had been on the market for 51 days; a year earlier, they stayed on the market for 45 days.