What the Fed rate pause means for mortgages

The benchmark interest rate range will remain unchanged this month. That was the big economic news revealed on Wednesday after the Federal Reserve announced that it was keeping the range — already at a 22-year high between 5.25% and 5.50% — the same. This is the second time in a row that the Fed has left rates paused following 11 consecutive increases (they didn't move it in September, either). 

"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the Fed said in their Wednesday announcement. "In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. The Committee will continue to assess additional information and its implications for monetary policy."

Higher interest rates have led to elevated borrowing costs for everything from credit cards and personal loans to home equity loans and home equity lines of credit (HELOCs). But what does the rate pause now mean for homebuyers and those owners looking to refinance their existing loans? And what should both parties do, if anything?

Check your mortgage rate options here to see what you're eligible for.

What the Fed rate pause means for mortgages

While the Fed rate pause won't necessarily help homebuyers and those looking for a refinance, it won't hurt them either. And in today's economy that's a (small) win. It means that mortgage rates will remain where they are, at least for now. 

So if you were comfortable with taking out a 30-year mortgage loan at today's rates (approximately 8%) then you should still be able to do so without issue. And if you were concerned that a rate bump would push you out of contention, you can rest comfortably knowing that you have a few more weeks, at least, before higher rates become the new norm.

That all being said, it may make sense to lock in a rate now, even if they're high. The Fed is still working toward an inflation target goal of 2% and, to get there, another rate hike is likely. That will reverberate throughout the economy and particularly in the real estate market. So while an 8% rate may not seem like a great deal, particularly when stacked against the sub-3% rates that could've been secured just a few years ago, it will still be advantageous when compared to a possible 8.50% or 9% rate that could be coming soon.

See what mortgage rate you could potentially lock in here now.

How to get a lower mortgage rate now

While the rates of 2020 and 2021 are unlikely to return anytime soon, there are still some reliable ways buyers can get a lower mortgage interest rate now. Here are three:

• Buy mortgage points: Mortgage points act as a fee that the buyer pays the lender to secure a lower rate. So, in today's rate climate, think of it as 8% without points and 7.75% with them. It won't be a huge difference in the rate, but every dollar counts. Just make sure to plan on staying in the house long enough to recuperate the points cost or it may not be worth it for you.
• Consider an adjustable-rate mortgage: Adjustable-rate mortgages are exactly what their name implies: They're mortgages with a rate that will adjust over time. This can be beneficial to start since the rate will be lower than what can be found with a fixed-rate mortgage. But it will rise over time, so be prepared for their inevitability, as well.
• Look for assumable mortgage possibilities: Assumable mortgages aren't readily available, but in some circumstances, you may be able to find one. This will, in theory, allow you to assume an existing mortgage rate (which is likely to be lower) versus the currently available elevated ones.

The bottom line

While the decision to pause interest rate hikes isn't as obviously beneficial as a choice to reduce them, it does still offer borrowers some desired breathing room. But with a potential rate hike still on the horizon and additional work to be done to get to the Fed's target inflation goal, this may be the last time borrowers can secure a mortgage rate at even today's higher rates. So research your options, look into buying mortgage points or an adjustable-rate mortgage and inquire about the possibility of an assumable mortgage now. Learn more about all of your mortgage rate options here today.