August 2025 Real Estate & Loan Hacks You'll Wish You Knew Sooner

What's the Impact of July 30 Fed decision on Mortgage Rates?

The Federal Reserve's Federal Open Market Committee (FOMC) decided to maintain the federal funds rate within its existing target range of 4.25% to 4.5%. This is the fifth consecutive meeting where the Feds have kept the rate steady and not reduced.  

Here's how this decision might affect mortgage rates:

Fixed-rate mortgages: These are not directly tied to the Fed's benchmark rate but instead follow the yield on 10-year Treasury bonds, which are influenced by factors like inflation expectations, the Fed's actions, and investor reactions.

Variable-rate loans: Loans like home equity lines of credit and adjustable-rate mortgages (ARMs) with variable interest rates are more closely connected to the federal funds rate and may adjust within two billing cycles after any changes to the Fed's rate.

Looking ahead: The next FOMC meeting is in September, where many factors will determine whether the committee (not Jerome Powell himself) will decide to reduce rates.

According to a new report, if mortgage rates dip to 6%, over 5.5 million more households—including 1.6 million renters—could afford the median-priced home. That shift could lead to an estimated 550,000 additional home sales in the next 12–18 months.

While current rates hover around 6.72%, even a small decline may unlock more buyer activity—especially in areas where affordability is within closer reach.

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  What Does "The Feds Kept Rates The Same” From Yesterday Really Mean?

  I think it's important we, as Realtors, understand a little behind all this.

  FOMC Membership: Consists of 12 voting members:  the seven members of the Board of Governors, the Pres of the Fed Reserve Bank of NY and four rotating Reserve Bank Presidents.

  Key Decisions: The committee aims to promote maximum employment and price stability.

  Monetary Policy: The FOMC's primary role is to manage the nation's monetary policy, which includes setting interest rate targets & managing money supply.                                                                           

  Impact on Economy: The FOMC’s decisions influence interest rates, credit conditions, and ultimately, the pace of economic growth.

  The committee meets regularly (at least eight times a year) to assess the state of the economy and make decisions about monetary policy. These decisions are closely watched by the public, media, and financial markets because they can have far-reaching effects on individuals, businesses, and the broader economy.

  Why then do mortgage rates tend to follow 10 year treasury rates?

  • Treasuries are considered very safe investments.

  • Mortgage-backed securities (MBS), which are bundles of thousands of mortgages, are riskier than Treasuries because they carry additional risks like prepayment or default.

  • To make MBS attractive to investors, they need to offer a higher return (yield) compared to the safer Treasury notes.

  • Therefore, when the yield on the 10-year Treasury note rises, it signifies a higher return available on a relatively safe investment. To remain competitive and attract investors to the slightly riskier mortgage market, lenders typically raise mortgage rates as well.
    
    
    
    
    
    

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