Will Mortgage Rates Go Down After the March Fed Meeting?

Will mortgage rates rise after the Fed meets?

The Federal Reserve will hold its next Open Market Committee meeting on March 18-19. Will it come with another rate cut? Or will the committee revert to keeping rates steady (or possibly even raise them)?

The annualized inflation rate remains above the Fed’s long-term goal of 2%, but most recently decreased to 2.8% in February from 3% in January.

At its three previous meetings, the central bank made 25-basis-point cuts in November and December, before holding in January. What will economic indicators justify for the March fed funds rate decision?

Will the Fed cut rates in March?

The FOMC is coming off keeping the federal funds rate steady after three straight cuts. The central bank had waited for the economy to show sustainable softness before loosening its monetary policy in 2024.

Many experts anticipated more cuts and gradually descending interest rates in 2025. However, inflation has proven stubborn, growing through the final quarter of last year. This, plus the Trump administration’s deliberate chaos, could put additional cuts on hold.

“The last thing the Fed wants to see is an inflationary shock coming from tariffs,” said Mark Zandi, chief economist at Moody’s Analytics. “If home construction costs rise, those increases get passed down to buyers, and that could keep inflation elevated longer than expected, delaying any rate cuts.”

As the Fed’s job includes stabilizing the U.S. financial system and setting monetary policy, it’s responsible for maintaining a long-term inflation rate of 2%. Keeping inflation near that level keeps prices steady for consumers.

The annualized inflation rate started surging in 2021 and spiked to a 41-year high of 9.1% in June 2022, according to the U.S. Bureau of Labor Statistics. That year, the Federal Open Market Committee (FOMC) took action by hiking the federal funds rate to tame inflation.

The Fed adjusted its monetary tightening policy multiple times since then. Most recently, the central bank cut the fed funds rate by 25 basis points in both November and December, then held it in January. After growing for four straight months, the latest inflation reading declined to 2.8% in February from 3% in January.

With the current economic conditions, market experts overwhelming predict the Fed to hold rates steady at its March meeting.

“A cooling labor market combined with upside inflation pressure puts the Fed in a tough position,” said Kara Ng, senior economist at Zillow Home Loans. “The Bureau of Labor Statistics employment report on March 7 may provide additional insight, but it won’t yet fully reflect potential impacts from government layoffs. For now, downside risks stemming from uncertainty over fiscal, labor, and economic policies have continued to push mortgage rates toward the lower levels seen in early December.”

Interest rate growth could continue

Interest rates rollercoastered throughout 2023 and 2024, with the average 30-year fixed mortgage ranging from 6.08% to 7.79%, according to Freddie Mac. Most recently, The average 30-year fixed rate mortgage reached 6.63% on Mar. 6.

Although the annualized pace of inflation fell from the last two years, it’s still above the Fed’s goal. Because of this, tightening monetary policies could always return until inflation gets brought down to a normalized level. Interest rates are notoriously difficult to predict but typically rise in response to Fed tightening.

Due to the rapid rate growth we saw in 2023, some lenders will allow you to lock in a rate for 90 days at little or no cost so you’re protected from higher rates if you don’t close quickly. A few examples of lenders offering this include AmeriSave Mortgage, Quicken Loans, and Rocket Mortgage.

Some lenders are even offering borrowers refinances without repeat lending fees or appraisal fees when rates eventually hit a down cycle. When mortgage shopping, be sure to ask your loan officer about these and potentially other services.

Mortgage rates and the Fed’s role

The Federal Reserve doesn’t determine mortgage rates. Instead, rates are intrinsically tied to the Fed’s actions. At its final meeting of 2024, the FOMC projected two 25-point cuts for this year, with the caveat that they will make policy adjustments as necessary.

The fed funds rate is the amount banks pay to borrow money from each other overnight and an increase signals higher inflation and economic expansion. Mortgage interest rates typically rise in response to growth in the fed funds rate.

How mortgage rates respond in the immediate aftermath of these FOMC meetings has been a mixed bag over the last year. Following the three most recent rate decisions, they decreased one (0.01%) basis point after November’s cut, jumped 12 (0.12%) points following December’s cut, and dipped one (0.01%) point after January’s hold.

Advice for borrowers

Even if you missed out on the rock-bottom rates from the last couple years, they’re still below average historically, you can always refinance in a down cycle, and many people build wealth through home equity. Notably, after peaking at 7.04% on Jan. 16, the average 30-year fixed rate descended to 6.63% on Mar. 6.

“Because mortgage rates tend to fluctuate, I always advise buyers to focus on their specific budget and needs rather than trying to predict economic factors,” said Nick Boniakowski, head of agent partnerships at Opendoor.

If you’re ready to become a homeowner, speak with a local mortgage lender to see what loans and interest rates you can qualify for ahead of March’s Fed meeting.