What will happen to mortgage rates after the Fed's April meeting? Expert predictions vary

Despite numerous Federal Reserve's interest rate hikes in recent years, inflation has remained stickier than many expected. The most recent inflation data showed prices rising by 3.5% year-over-year in March, which exceeds the Fed's 2% target.

As such, the Fed has held interest rates steady in recent months. The Fed does not directly set mortgage rates, but the central bank's decisions regarding its benchmark rate will generally affect the direction of mortgage rates. In turn, many prospective homebuyers are hoping the Fed will cut interest rates to unlock more movement in the real estate market.

The next time the Fed meets will be from April 30 to May 1, and while most experts expect the central bank to hold rates steady, the Fed's forecasts and commentary could have a more immediate effect on mortgage rates.

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What will happen to mortgage rates after the Fed's April meeting? Expert predictions vary

Here are a few different scenarios regarding what could happen after the next Fed meeting, according to experts.

Scenario #1: Mortgage rates will decrease slightly after the Fed's April meeting

One possibility is that mortgage rates will fall slightly from their current levels after the Fed's April meeting.

"I think we may see a 0.125% to .025% reduction after the April/May Fed meeting," says Michelle White, national mortgage expert at The CE Shop. 

With the expectation that the Fed is still planning to cut rates at some point in 2024, it could put downward pressure on mortgage rates.

"The Fed has held that their goal is to reduce rates in 2024 provided the market allows for it," says White. 

In all, she foresees a gradual and calculated reduction in mortgage rates through the end of the year, totaling a 1% decrease.

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Scenario #2: Mortgage rates won't decrease until at least June

Another possibility is that the mortgage market won't react much to the next Fed meeting, but there could be a mortgage rates drop after the Fed meets on June 11. The mortgage rate drop might not be as dramatic as some expected a few months ago, when it appeared that inflation was more tempered, but many still see rate cuts coming later this year.

"There is some optimism for rate cuts, however, we were forecasting three to four rate cuts in 2024 at the beginning of the year, and it now is unlikely. People are now adjusting those expectations down to two," says Ali Nassirian, vice president of consumer & home lending at Travis Credit Union.

"Looking at the current data, there's roughly a 50% chance we'll see a rate cut in June," Nassirian adds.

Just a few weeks ago, there was generally a stronger conviction that rate cuts would start in June. However, that now seems to many like an optimistic start date.

"We don't anticipate a drop until June, but even that is murkier after the most recent rounds of data that came out on jobs and inflation," says Greg Schwartz, CEO and co-founder of Tomo.

Tomo foresees mortgage rates falling from a 6.875% level at the end of Q1 to 6.5% by the end of Q4, though it recently revised its end-of-year mortgage interest rate predictions up from 6.375%.

Scenario #3: Mortgage rates will hardly budge in 2024

There's also the possibility that rates will hardly move in 2024, particularly in the mortgage market.

"I don't see a rate cut at the next Fed meeting. I think June would be the soonest cut we see. Even if they cut rates two or three times this year, I don't think we will see many moves in the mortgage market from those," says Brian Durham, vice president of risk management and managing broker at Realty Group LLC and Realty Group Premier.

"The things that will have a bigger impact on the mortgage markets will be things like the Fed's quantitative tightening policy, job numbers, and other inflationary or deflationary variables like the cost of oil," Durham adds.

Unless something changes, like a significant uptick in unemployment, Durham thinks rates could stay relatively flat for a while. 

"I believe we will continue to see rates remain stagnant in the 7% and 6% range until into 2025 and potentially longer," says Durham.

The bottom line

Expert mortgage rate predictions vary somewhat, but the general consensus seems to be that there won't be dramatic decreases in the near future. That said, conditions can change, as recent predictions of rate cuts in early 2024 have not come to fruition.

It's possible that we'll even see mortgage interest rates rise if inflation persists. So, some buyers might prefer to act now, rather than waiting for however long it might take for mortgage rates to become more favorable, if at all.