At its fourth meeting of 2023, the Federal Reserve decided to skip raising the Fed funds rate, which is the amount banks pay to borrow money from each other overnight. This was the Fed’s first skip in rate hikes since the first quarter of last year, ending a streak of 10 consecutive increases.

The most recent data – specifically the May Consumer Price Index, which showed that inflation has been cut by more than half from last year’s peak and has reached its lowest level in about two years – was the likely impetus for the decision. Previous rate hikes appear to have been effective in the Fed’s continuing efforts to rein in inflation.

Looking ahead to the Fed’s next meeting in late July, the possibility of a resumption in rate increases is still on the table. The overall inflation rate remains around 4%, which is above the Fed’s target number of 2%. The June CPI and jobs reports will factor heavily into the Fed’s decision to either skip another rate hike or raise its rate for the 11th time since March 2022.


What does the skip in Fed rate hikes mean to mortgage rates?

As we have pointed out in previous blogs about Fed rate increases, the Federal Reserve technically doesn’t determine mortgage rates. The rate of inflation has a much more direct impact on them, however. Skipping an increase in the Fed funds rate is a good sign that inflation is slowing, especially when supported by economic data. That combination generally puts downward pressure on mortgage rates.

If you’re looking to buy a home, there are steps you can take to get an even lower rate in today’s market. One of them is the option of a Temporary Buydown that allows you to enjoy reduced payments at the beginning of your Conventional Conforming, FHA, VA, or Jumbo mortgage.

Remember: unlike the Fed rate, mortgage rates change daily and sometimes hourly. They still occasionally go down, despite the direction of the Fed rate and often in tandem with the rate of inflation.

The best way to navigate interest rates on home loans is to speak with a Homeowners Licensed Mortgage Professional about current market conditions. In any market situation, we’re here to help you understand the rates that are available to you and get the best possible pricing on your next home loan.

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