Weekly Update: Mortgage Rates Climb as Fed Decides to Hold Steady

Mortgage rates have shifted upward this week as lenders brace for an uncertain economic landscape. The Federal Reserve chose to keep the federal funds rate steady at the March 19 meeting. They emphasized the need for stronger data before making any policy changes. In this environment, mortgage lenders often react quickly, adjusting their rates in response to current events.

As of March 20, the average interest rate for a 30-year fixed mortgage reached 6.8%, marking an increase of 18 basis points compared to the previous week. For clarity, a basis point is one-hundredth of a percentage point.

This decision to maintain rates from the Federal Reserve wasn’t unexpected. Many analysts had predicted this outcome, expecting the Fed to hold the federal funds rate at 4.25%-4.5%. In his post-meeting remarks, Chairman Jerome Powell noted the economy’s strong performance, highlighting progress on inflation and employment.

However, Powell also expressed caution about rising inflation, linking it in part to tariffs. He mentioned that uncertainties around the economic impact of various policies, including trade and immigration, remain significant. Powell stated that while inflation may not progress as quickly as expected, many Fed officials foresee a decrease in the federal funds rate by the end of the year.

Current conditions are challenging for homebuyers. Many face two main hurdles: affordability and limited housing inventory. Rising interest rates and high construction costs are sidelining potential buyers. A recent report indicated that new home construction permits dropped by 6.8% last month compared to February 2024, suggesting fewer homes will be available in the near future. Builders are hesitant to apply for permits unless they are confident these new homes will sell, exacerbating the inventory issue.

In the current market, it can be tough to find the right time to buy a home. With mortgage rates remaining high since the historic lows of the pandemic, potential buyers might feel discouraged. Instead of waiting for an elusive "perfect" moment, it’s essential to focus on your own financial situation. If you find a home that fits your budget and needs, it may be wise to act rather than waiting for a significant market shift.

Recent surveys reveal that both consumers and businesses are feeling increasingly uncertain about the economy. With homebuyers and builders both facing pressures, the housing market’s future remains unpredictable. However, the desire for homeownership persists. Finding a balance between necessity and market conditions is key for those looking to purchase a home today.

For additional insights on interest rates, visit NerdWallet.

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