Uncertainty Makes Federal Reserve Hold Rates in June. What’s Next for Home Buyers?

Fed holds in June

The Federal Reserve kept the federal funds target range steady at its June meeting, continuing the wait-and-see approach.

With the annualized pace of inflation ticking back up in May and the Trump Administration sowing instability domestically and abroad, the central bank determined now isn’t the time.

“While inflation has cooled and is closer to the Fed’s 2% target, overwhelming sentiment is that we are still in calm before the storm and the full impacts of tariffs are still to be felt,” said Selma Hepp, chief economist at Cotality. “Similarly, the uncertain job market is keeping the Fed on the sidelines.”

How will mortgage rates react to the Fed news?

Interest rates typically rise alongside increases to the fed funds rate and decline after cuts. However, mortgage rate movements varied in the immediate aftermath of the most recent Fed decisions.

The day following each of the last two rate cuts in November and December, the average 30-year fixed-rate mortgage (FRM) respectively decreased one (0.01%) basis point and jumped 12 (0.12%) basis points week-over-week, according to Freddie Mac. After January, March, and May’s rate holds, the 30-year FRM dipped one (0.01%) basis point, rose two (0.02%), and stayed flat from the week prior.

Over the last three months, rate movements occupied a relatively narrow band. The average 30-year FRM oscillated between 6.62% and 6.89% from March 6 to June 18. This fourth-consecutive Fed hold will likely provide borrowers with more of the same in the near future.

In its post-meeting statement, the FOMC said economic activity keeps expanding at a solid pace, but economic uncertainty and inflation remain elevated. To determine any policy adjustments, the committee will account for “a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations,” as well as “financial and international developments.”

In 2025, inflation mostly progressed toward the FOMC’s 2% goal, reaching 2.4% in May and 2.3% in April from 3% in January, according to the Bureau of Labor Statistics. However, it needs to be seen as sustainable for a cut to be called for. A Fed cut followed by decreasing mortgage rates would surely be a welcome sign for house hunters, many of who have been sidelined due to lack of affordability.

“All in, a Fed on hold aligns with our forecast for little change in mortgage rates for the time being. Mortgage Bankers Association (MBA) data continue to show modest increases in purchase application activity relative to last year, and we expect that trend to continue for the remainder of 2025 and into 2026,” said Mike Fratantoni, chief economist at the MBA.

The Fed’s role and June’s FOMC meeting

At its June meeting, the Federal Open Market Committee (FOMC) unanimously voted to maintain the federal funds target range. This decision marks the fourth-straight hold, following January, March, and May.

In addition to keeping the fed funds rate steady, the FOMC will continue to reduce its Treasury securities, mortgage-backed securities, and agency debt. The committee also said it would assess new data and evolving outlooks to determine potential policy adjustments.

The U.S. annualized inflation rate hit a 41-year high of 9.1% in June 2022 and the Fed started taking action to tame it. Inflation mostly followed a downward trajectory since, ranging between 2.3% and 3.5% since 2024. Although the inflation rate came down from 3% in January to 2.4% in May, it remains above the Fed’s long-term goal of 2%.

“In addition to the Fed’s two mandates competing against each other, the Fed’s job is complicated by remaining in the crosshairs of political pressures while trying to ensure it unequivocally maintains its much-needed independence,” said Hepp.

President Trump has scrutinized the Fed and Jerome Powell in particular, calling the central bank chairman a “fool” and “numbskull.”

Multiple economic and geopolitical factors influence mortgage rates, as well as the Fed’s actions. While the central bank technically doesn’t set mortgage interest rates itself, its monetary policies do intrinsically correlate with mortgage rate movements.

The latest projection materials showed the majority of FOMC members believe at least one rate cut will happen in 2025. The next FOMC meeting takes place on July 29-30, 2025.

Should you lock in a mortgage rate?

Since a bevy of factors impact mortgage rates, they’re subject to high volatility — especially during volatile times.

Although projections can (and do) shift with new information, the FOMC’s latest action signaled the economic forecast needs more stability and sustainable inflation cooling before another rate cut can be made. If the pace of inflation keeps slowing while employment remains healthy, additional cuts could be on the horizon.

“Focusing on long-term affordability and local market dynamics is always a better strategy than timing the market,” said Tim Lawlor, chief financial officer at Kiavi. “If the numbers work now, it’s worth consideration, especially given the potential for increased competition if/when rates begin to fall.”

Regardless of where rates go, you should always negotiate and get creative in budgeting. Building home equity is one of the most common ways to gain wealth and biggest advantages of owning property.

If you’re ready to begin your path to homeownership, talk to a local mortgage professional to see what rates and loan types you qualify for.