At its seventh meeting of 2023, the Federal Reserve decided once again 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 third skip amid 11 rate hikes instituted since the first quarter of last year in an attempt to rein in inflation.

Economists and other market watchers predicted this skip with almost 100% certainty. Some economic data reports continue to indicate that inflation has slowed enough that the Fed can feel comfortable holding rates steady for now. But the jobs market and consumer spending remain strong, which is good for avoiding a recession but not so good for tamping down inflation to the level the Fed would prefer.

Investors will be carefully scrutinizing the central bank’s post-meeting statement and Fed Chair Jerome Powell’s press conference for clues about what comes next at the Fed’s final meeting of 2023 in December. Powell has made it clear that the U.S. central bank wants to retain the option of another hike in case data shows inflation’s descent has stalled.

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 another 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 an adjustable rate mortgage that has an initial rate that’s typically lower than a fixed-rate 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.

How can we help?