What does it mean for homebuyers now that the Fed paused interest rate increases?

Earlier this week, the policymakers with the Federal Reserve voted to keep the federal funds rate at 3.75% to 4.00%, after raising rates in September. Although inflation remains elevated, the Fed said it needed more economic data before deciding if another increase is necessary, according to Realtor.com.

So what does that mean for homebuyers?

In the short term, not much will change in an already tough market. Home prices are expected to remain elevated and interest rates are near three-year highs. Data from Freddie Mac shows mortgage rates averaged 7.32% last week, which is nearing the three-year high of 7.4%.

Realtor.com chief economist Danielle Hale says homebuyers can get a better interest rate by taking a few steps.

“Those hoping to make a home purchase in the months ahead should plan for further mortgage rate volatility and rate-proof their home shopping budget by testing out a range of possible mortgage rates so they’ll be prepared to react,” Hale said.

Buyers can also make a higher down payment and take steps to improve their credit in order to get a better interest rate.

Despite the pause in rate hikes, economists still expect a quarter-point Fed increase in December and another one in early 2027, which will impact the market. Although those increases aren’t guaranteed, borrowers should prepare for higher borrowing costs to remain in place for several months.

It’s important to remember that the Fed does not set mortgage rates. Those rates are mostly impacted by the 10-year Treasury yield and the bond markets. That means that a 0.25-point Fed hike does not mean mortgage rates will increase by the same amount.

Miami-based real estate agent Mendel Fellig told Realtor.com that buyers need to understand the new normal in the market.

“Buyers need to adjust their expectations and recognize that higher mortgage rates may be here for the foreseeable future,” Fellig said. “Historically, rates have been significantly higher, and buyers should focus on finding a property they love at a price they can comfortably afford rather than trying to time the market.”