Will Mortgage Rates Go Down After the May Fed Meeting?

Will mortgage rates rise after the Fed meets?

The Federal Reserve will hold its next Open Market Committee meeting on May 6-7. Will it come with another rate cut? Or will the committee keep 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 2.4% in March from 2.8% in February and 3% in January.

At its three previous meetings, the central bank made a 25-basis-point cut December, before holding in January and again in March. How will economic data and indicators weigh on the May fed funds rate decision?

Will the Fed cut rates in May?

The FOMC is coming off two consecutive holds on the federal funds rate 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, with the Trump administration's manufactured chaos and tariff turmoil, additional cuts could be further down the line.

“The quandary facing the Federal Reserve is that while the trend in the data is clearly showing a slowing economy, it also renewed upward pressure on inflation," said Mike Fratantoni, chief economist at the Mortgage Bankers Association. "We expect that the Fed will hold rates steady at its meeting next week and will indicate that it will continue to hold at this level until it becomes clear whether a recession or inflation is the bigger risk.”

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 December, then held it in January and March. After growing for four straight months, the latest inflation reading declined to 2.4% in March from 2.8% in February.

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

“Economic growth went negative in the first quarter as businesses rushed to import goods before tariffs went into effect," Fratantoni continued. "In addition to the pullback in activity, the inflation metrics increased relative to the prior quarter, so both growth and inflation were headed in the wrong direction."

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 6.76% on May 1.

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 jumped 12 (0.12%) basis points following December's cut, then dipped one (0.01%) point after January's hold and inched up two (0.02%) points after March's.

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 in 2025 at 7.04% on Jan. 16, the average 30-year fixed rate landed at 6.76% on May 1.

"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 May's Fed meeting.