» Will the Fed Hold, Cut, or Hike? What the March 2025 Meeting Means for Mortgage Rates

The Federal Reserve’s March 18-19, 2025 meeting is approaching, and all eyes are on whether policymakers will hold rates steady, cut, or hike. Given recent economic indicators, the most likely outcome is a rate hold, with potential cuts coming later in the year.

For homebuyers, sellers, and real estate professionals, the Fed’s decision significantly affects mortgage rates, which impact affordability and homeownership decisions. Let’s explain what to expect and how it might influence the housing market.

Where the Fed Stands in March 2025

The Federal Reserve’s benchmark interest rate currently sits in the 4.25%–4.50% range, down from its peak of 5.50% in 2023-2024 when inflation was running high. Since then, inflation has been easing, but not enough for the Fed to aggressively cut rates.

At this meeting, the Fed has three choices:

Hold Rates Steady – The most likely scenario, allowing more time to assess economic conditions.
Cut Rates – Possible later in 2025 if inflation keeps falling.
Raise Rates – Improbable, as inflation has already slowed.

Key Economic Indicators Affecting the Fed’s Decision

Several factors are shaping the Fed’s likely decision to hold rates:

1. Inflation Is Cooling but Still Above Target

The U.S. annual inflation rate was 2.8% in February, down from 3% in January, getting closer to the Fed’s 2% target but still slightly above.
The Fed is reluctant to cut rates too soon, fearing it could reignite inflation.

2. The Labor Market Remains Strong but Shows Signs of Slowing

Unemployment remains low at 4.1%, and wage growth is moderating.
However, consumer spending has softened, suggesting potential economic slowing ahead.
The Fed may want to see more signs of slowing inflation before committing to rate cuts.

3. Financial Markets and Trade Policy Uncertainty

Recent global trade tensions and tariff disputes have added volatility.
The Fed tends to avoid major rate moves during times of uncertainty, supporting the case for a rate hold.

Given these mixed signals, the Fed is expected to pause rate changes in March and wait for more economic data before considering cuts later in the year.

How the Fed’s Decision Will Affect Mortgage Rates

Mortgage rates don’t directly follow the Fed’s rate but are influenced by it. If the Fed holds rates steady:

1. Mortgage Rates Will Stay in Their Current Range

As of March 12, 2025, the average 30-year fixed-rate mortgage sits around 6.63%, down from 6.76% the previous week.
A Fed rate hold means mortgage rates are unlikely to spike or drop sharply in the short term.

2. Homebuyer Affordability Improves Slightly

Stable mortgage rates help buyers plan better and predict costs more accurately.
However, homebuyers waiting for a significant drop in rates might need to adjust expectations, as significant rate cuts may not happen until later in 2025.

3. Refinancing Could Pick Up If Rates Decline Later

Refinancing applications remain moderate but could increase if the Fed signals rate cuts later in the year.
Homeowners with mortgage rates above 7% might consider locking in lower rates if they see a slight decline.

What’s Next? Will the Fed Cut Rates Later in 2025?

While no rate cut is expected in March, the outlook for mid-to-late 2025 remains open. Analysts suggest:

If inflation keeps dropping, the Fed could cut rates by June or September 2025.
If the economy weakens, the Fed may be forced to cut sooner to avoid a recession.
If inflation stays sticky, rate cuts could be delayed until late 2025 or 2026.

A rate cut later in the year would likely push mortgage rates lower, making home purchases and refinancing more attractive.

What Should Homebuyers and Homeowners Do Now?

Don’t assume rates will drop dramatically, lock in a rate if you find an affordable mortgage today.
Refinancing: Monitor rates closely, tiny drops could create opportunities to secure a lower rate.
The Fed’s stability should keep buyer demand steady, preventing a significant slowdown in sales.

Final Thoughts

The March 2025 Fed meeting is unlikely to bring a rate cut, but mortgage rates are already slightly lower. If the economy continues to cool, rate cuts could come later in 2025, making homeownership and refinancing more affordable.

For now, buyers and homeowners should stay informed, watch mortgage rate trends, and be ready to act if better opportunities arise.

Grant Van Dyke