The Fed Held Rates Again — So Why Did Mortgage Rates Go Up?

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The Fed's decision: a fifth straight hold — and a 9–3 vote

Welcome to Mortgage Mom Radio. I'm Debbie Marcoux, the Mortgage Mom, and today we're talking about the Fed's decision to leave rates as-is — which is awesome, for now — what happened, what the anticipation is for the next Fed meeting in six weeks, and what you should be doing if you're a homeowner who's been holding out on a refinance, or a buyer who's been waiting and hoping rates come down.

Big day in the mortgage world. The Federal Reserve met this morning and decided to leave interest rates exactly where they are — the fifth meeting in a row without a change. But here's what nobody is talking about: out of the twelve Fed officials, three voted no. They didn't want to hold, and they didn't want to cut — they actually wanted to increase interest rates. That is pretty telling.

Kevin Warsh is hard to read — on purpose

There's a brand-new Fed chair, Kevin Warsh, and he said their next rate hike could come as soon as September. When Jerome Powell was chair, he used to give his forward thinking — “this is what we're considering for next time” — and we'd watch the reports and gauge what was coming. Warsh is not doing that. He is not giving us foresight. The only thing he said today is that inflation remains elevated above the 2% goal, partly from supply shocks and energy prices tied to the Middle East conflict, and that the economy is still expanding at a solid pace. He told Congress he has no tolerance for inflation, which has run above the Fed's 2% target for more than five years.

I'm not harping on the guy at all — we need it fixed — but it is very hard to read what he's going to do next. My opinion: when you are that serious and that forthcoming about needing to be at 2%, you're going to do what it takes to get to 2%. I would not be surprised if the Fed increased rates at the September meeting.

What could stop that? Between now and then we get the economic reports: tomorrow brings second-quarter GDP and the PCE inflation report, and before the September meeting we'll also get retail spending, the jobs report, and one more CPI. We're going to have to get very familiar with these reports and read between the lines — where are they versus where they should be. In my personal opinion, it's very 50/50 whether we hold or get a hike unless something major happens with inflation — and we are not going to see a rate cut come September. That's my opinion, not a guarantee.

The Fed doesn't set your mortgage rate

The Fed does not actually set interest rates for mortgages. Mortgage rates are more like the stock market: we follow notes, bonds, and Treasuries, and we move with the market. Oil is a good example — not directly connected, but a very good path to follow. Yesterday oil was cheaper per barrel than Monday, and we got a little reprieve after rates had climbed day after day for almost a month. I thought maybe we'd hit the plateau — rates usually go up, up, up, level off, then come down a little. Then I woke up this morning: oil is higher again, and rates are once again not going in the right direction. How long will they keep rising? There is absolutely no way to know.

So why did mortgage rates go up today when the Fed said it was holding? Because mortgages are based on the economy and the market, not the Federal Reserve prime rate. What actually benefited from today's hold: home equity lines of credit, credit card rates, and shorter-term loans — car loans, personal notes, student loans. Those are tied to prime plus a margin and will stay flat over the next 30 days. Mortgage rates have a mind of their own.

Where rates are this week

The Freddie Mac 30-year fixed weekly average is 6.58% for the week of July 23 — that's last week. The Mortgage Bankers Association had the 30-year at 6.76% at the end of the week of July 24. Zillow's 30-year daily average is 6.69% as of today, with the 15-year around 6.07 to 6.15. The 10-year Treasury yield was 4.63% when I pulled it about an hour and a half ago — and that number literally moves by the minute.

I'd tell you that as of today, the Freddie Mac/Fannie Mae average is really closer to 6.75%, with the FHA and VA averages around 6.5% — a little lower than conventional.

High-cost areas, high-balance pricing — and VA's no-limit advantage

If you're buying in an area considered high-cost — most of California, a lot of Washington, very little of Florida unless you're near Miami — you can get a conventional or FHA loan at a higher loan amount than the standard limits. But that high-cost pricing, which you'll hear called a high-balance loan, comes with a higher interest rate: when the average conventional rate is about 6.75%, you're looking at about 7% for a high-balance, high-cost-area loan.

VA is different: it has no loan limit at all. You can do jumbo VA loans at $3–4 million with some of the very best rates possible. You still have to qualify on income and credit — being a veteran doesn't hand you a $3 million loan — but it is a phenomenal program, and if you're a vet, you absolutely deserve it.

Q&A: is there an age limit?

Karen asks: “Is there an age limit to conventional loans, say 70-plus?”

There are no age limits on any loan except a reverse mortgage, where you generally need to be over 62. We are not allowed to discriminate by age — you could be 90 years old applying for a 30-year fixed conventional loan and we cannot turn you down because we feel you wouldn't be around long enough to pay it back. And on the reverse side, some programs will go down into your 50s, so if that interests you, don't hesitate to ask.

September: what Wall Street is betting

As of today, after the Fed met this morning, Wall Street puts roughly 76 to 80% odds on a hike at the September 15–16 meeting. A month ago it was 59%. If it happens, it would be the Fed's first rate increase since July of 2023.

Don't panic — as we covered, mortgage rates aren't directly tied to the Fed's rate. But if everybody believes a hike is coming in September, our rate sheets are going to slowly continue to increase most days between now and then. The Federal Reserve isn't coming to the rescue anytime soon.

Q&A: reverse mortgages and your heirs

Sam asks: “Are reverse mortgages able to be taken over by the descendants?”

That answer is negative. A reverse mortgage is yours until you pass. When you pass, your descendants do have the opportunity to refinance the property to pay it off and keep it with the heirs. And if it's over-encumbered — say your parent owes a million dollars on a $500,000 property — the bank will do an appraisal and you'll have the opportunity to buy the home at 80% of the appraised value. But take over the loan? No. You have to do something to get that bank paid off.

Q&A: are foreclosures spiking?

Sam also asks: “Are you seeing more foreclosures coming into the market?”

I see more notices — the “you're going to go into foreclosure soon if you don't do something” letters. But I have not personally seen a huge uptick in foreclosures being listed across the nation. Last I checked, a few weeks ago, we had about 227,000 properties in default. That sounds like a huge number, but remember: since COVID we really haven't seen foreclosures — there was a moratorium, and the banks helped people get caught up. Go back to 2016 or 2018 and 227,000 notices of default is a very normal number.

Compare the real thing: in the crash years — the market stalled in 2006, foreclosures popped in 2007 through 2010 — we had over a million foreclosures actually listed for sale, and that didn't include the notices of default. By 2012–2013 we were pretty recovered. What we're seeing now is banks starting to do what they're supposed to be allowed to do. Nothing alarming, nothing concerning — as of today, July 29. Could that change next week? It absolutely could.

Do I think the market is starting to stall a little? Yes. Do I think you'll get the very highest price any home in your tract has ever sold for? I do not. We're starting to level off, which the market very much needed to do — we can't set a new record with every single closing. We need slow appreciation. And a lot of sellers, instead of dropping their price, are pulling their houses off the market — which only hurts inventory and helps keep values elevated.

If you've been waiting for cuts, hear this

I'm going to read what I wrote so I don't get sidetracked: the next Fed move is more likely up than down. Waiting for a lower rate has cost buyers all year. If the payment works today, the house matters more than the headline. Quote me on that.

I have clients who have been waiting since 2022, when the first hikes started. Waiting through 2023, 2024, 2025 — and now we're in 2026. The rates are what they are. You cannot time them. The only thing you can time is a refinance of your current balance — no cash out, you just want a lower payment. That you can wait on until the number makes sense. Everything else, you can't time. We were hopeful, rates were heading down, I did shows saying it looked like we were getting there — and then the Middle East happened. Nobody expected that, and it changed the trajectory.

If the house is what you need and the payment makes sense — you qualify for it, you're comfortable with it — go buy the house, and figure out a lower rate down the road if rates drop. If you would have bought in 2020 through 2025, go look at what you'd have paid then versus what it's worth today. You are hurting yourself by putting yourself on hold.

In escrow? Lock. Refinancing? Some of this shouldn't wait

Anybody mid-transaction who has started a loan and not locked the rate, purchase or refinance: please lock. Please lock, please lock, please lock. Rates are not going to get better over the next two to three weeks. Just lock the rate.

Would-be refinancers: the sub-6% February window came and went. I reached out to numerous people who could have been at 5.75 to 5.875%. They believed rates would keep getting better and chose not to move — and their current rates are sitting in the 7.25 to 7.5 range. I've been doing this for over 30 years — since 1995, so call it 31 this year. If I reach out and tell you it's a good time to explore the numbers, please trust me and do it.

And for people needing to consolidate debt: a debt-consolidation loan is always going to price higher than a rate-and-term loan, so there is no reason to wait. We do that loan today, get you out of the debt today — and about six months after closing, we refinance you again anyway, at a lower rate, once your FICO score is better and you're not pulling cash out. Don't wait for rates to come down; the rate on a cash-out is going to sting either way. Get done what you need done so you can move on with life, and then we worry about when to lock that next refinance.

“Marry the house, marry the rate”

Sam says: “Date the rate, marry the house.” Yes and no. I would have believed that three or four years ago. Right now, it is marry the house and marry the rate. I do not want anybody believing the rate they get today is short-term and that within 12 or even 24 months they'll be out of it. I think we're in more average, realistic rates that are going to be around for quite some time. So marry the house, marry the rate, be comfortable in the payment, know you can afford it — and hey, if rates come down and Debbie reaches out and says we should explore a refinance, please listen to me, jump on it, and we'll go over it together.

Wrap-up

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