What the Fed rate pause may mean for mortgage interest rates

Another Federal Reserve meeting, another interest rate pause. For the third time this year, the central bank elected to keep its Federal funds rate untouched, leaving it at the same range of 3.50% to 3.75% on Wednesday. That all but ensures that interest rates offered by lenders will remain elevated. Or, put another way, savers will continue to benefit from bigger returns on their funds while borrowers will still need to contend with higher costs. And that will remain a problem for homebuyers and owners hoping to refinance their existing homes.

At the same time, a pause is still better than another interest rate hike, especially considering the recent surge in inflation that caused that rate to reach a multi-year high. Borrowers will just need to be a bit more strategic in their approach, and that begins with understanding what this latest Fed rate pause may potentially mean for mortgage interest rates. Below, we'll outline three things these borrowers need to know to make an informed decision on their next steps.

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What the Fed rate pause may mean for mortgage interest rates

While it will take time for this latest Fed rate pause to reverberate through the wider market, prospective homebuyers and owners looking to refinance should take the time to understand the likely impacts. Here's how it could influence mortgage rates, specifically:

Rates are likely to hold steady (or rise slightly)

Mortgage interest rates rose slightly in recent days as many lenders anticipated another Fed rate pause (there hasn't been a cut since December 2025). But they're unlikely to rise much further now that the rate decision has been made official. Borrowers should expect them to hold steady then or potentially rise slightly with those lenders who didn't preemptively change their offers before Wednesday's rate announcement. 

While this will still mean 30-year mortgage rate options in the low 6% range, those are still better than what many were offered last spring. Or in the spring before that. And this holding pattern may even be able to be exploited strategically by some borrowers, if they make certain moves in response.

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Borrowers will have more time to shop around for rates and lenders

There is a silver lining for borrowers this May – there won't be another Federal Reserve meeting in the month, removing one of the key drivers behind mortgage rates from contention. This will give borrowers more time to diligently shop around for rates and lenders without having to rush to lock in the first affordable offer they receive. And shopping around is critical when it comes to purchase and refinance loans, as it has been shown to result in a rate that's almost a full percentage point lower than average. 

This is true for both buyers and owners, as the latter type doesn't need to use the same lender that currently services their mortgage once they want to refinance it. Use this lull in the Fed calendar, then, to your advantage by establishing a baseline of at least three offers to compare against one another.

Lenders will look to other drivers besides the Federal Reserve

As was seen in recent weeks, lenders can and will still adjust their mortgage rate offers based on market conditions, whether those are volatile or steady. And with no Fed meeting scheduled until June, lenders will simply look to other drivers besides the Fed to determine the direction of their rates. 

That will continue to include the movement of the 10-year Treasury yield, but reports on inflation and unemployment may also take on outsized importance in the weeks ahead. In other words, don't forget that mortgage interest rates change daily, even without a looming Fed meeting to help move them up or downward.

The bottom line

A Fed rate pause isn't the cut homebuyers and owners were hoping for, but it's not as unfavorable as a rate hike would be. Borrowers should instead understand that mortgage rates are most likely to remain steady for the time being, minus some minor increases. But this will also mean more time to shop around for rates and lenders as the latter look to other drivers besides the Federal Reserve to adjust their offers. Consider speaking with lenders directly, too, as they may be able to present different rates, terms and costs that aren't always listed on their websites.