At its first meeting of 2026, the Federal Reserve opted Wednesday to leave interest rates unchanged — a decision that was expected but comes amid political and financial uncertainty.
In one statementthe Fed explained that “available indicators suggest that economic activity has been growing at a robust pace.” However, the statement also pointed to low job growth and inflation that “remains somewhat elevated.” As a result of the current economic landscape, the Fed ultimately “decided to maintain the target range for the federal funds rate at 3.5 percent to 3.75 percent,” the statement said.
The move was widely expected.
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The Fed doesn’t set mortgage rates, but its decision to raise or lower rates does affect what it costs borrowers to take out loans to purchase a home. As a result, the Fed’s moves are being closely watched by housing experts and real estate professionals — many of whom have hoped for years that mortgages would become cheaper.
However, the Fed’s decision to stay the course on Wednesday signals that changes in the mortgage sector will only occur gradually.
Mike Fratantoni
Reacting to the Fed’s decision, Mike Fratantoni – senior vice president and chief economist at the Mortgage Bankers Association – said in a statement Wednesday that the “MBA’s forecast was that mortgage rates would remain within a relatively narrow trading range for the foreseeable future, likely between 6 and 6.5.” [percent] for 30-year conforming loans.”
“The news from this meeting does not change our forecast for mortgage rates,” Fratantoni added.
Also on Wednesday the MBA reported that the number of applications for a home loan fell by 8.5 percent last week compared to the previous week.
MBA vice president and deputy chief economist Joel Kan said in a statement that “mortgage rates rose for the first time in a month, and as expected, refinancing applications fell 16 percent. The 30-year fixed rate was the highest in three weeks at 6.24 percent.”
Joel Kan
But Kan did offer some hope, noting that conditions last week were also more favorable than at the same time a year ago.
“Purchase applications were 18 percent higher than last year, and the average loan size remained at the highest level since September 2025, indicating that potential homebuyers remain active in early 2026,” he added.
Rocket Mortgage Chief Business Officer Bill Banfield was also optimistic on Wednesday, saying in a statement that “the housing market does not depend on a single interest rate decision – it does when people can plan with confidence.”
Bill Banfield
“Even without a cut today, mortgage rates are almost a full percentage point lower than a year ago, when rates hovered around 6.9 percent,” Banfield added. “That kind of steady, year-over-year improvement is what increases buyer confidence and draws people back to the market.”
Banfield also said that “buyers and homeowners have largely accepted that 5.5 to 6.5 percent is the new normal.”
Although the Fed’s decision did not cause a stir on Wednesday, a cloud of uncertainty hangs over the agency. President Trump has spent his time in office criticizing Chairman Jerome Powell, and the situation came to a head earlier this month when the Justice Department served the Fed with grand jury subpoenas. The DOJ also threatened last summer to file criminal charges against Powell’s testimony before the Senate Banking Committee.
The situation has raised questions about the Fed’s independence. Meanwhile, Trump has done just that reportedly limited the list of candidates to replace Powell to four people.
Trump’s feud with Powell and the Fed also comes as his White House battles with other national leaders and embarks on a series of unorthodox foreign policy programs, including tariffs, intervention in Venezuela and the prospect of seizing Greenland.
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