'Financial Hurdles To Owning A Home Have Rarely Been Higher,' Says BMO As Fed Holds Rates, Extending Wait For Homebuyers

Benzinga
2025.05.09 08:59
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The Federal Reserve maintained interest rates between 4.25% and 4.50%, marking a third consecutive pause, disappointing homebuyers seeking relief from high mortgage costs. BMO highlighted that financial hurdles for homeownership are at a peak, particularly for young households, with the median first-time homebuyer age reaching 38. The 30-year fixed mortgage rate rose to 6.90%, significantly higher than pre-2022 levels. Analysts predict a stagnant housing market until mortgage rates drop closer to 5%, amid increasing economic uncertainty and risks of higher unemployment and inflation.

The Federal Reserve kept interest rates steady Wednesday between 4.25% and 4.50%, marking the third consecutive pause in rate policy and extending the wait for potential homebuyers seeking relief from elevated mortgage costs.

What Happened: Housing market participants hoping for signs of mortgage rate relief were disappointed as Fed Chairman Jerome Powell emphasized that no further action on interest rate cuts will be taken until sufficient economic data supports such moves, reported The Street.

The decision comes as recent mortgage applications plunged 12.7% and existing home sales fell 5.9% in March, according to the Mortgage Bankers Association and National Association of Realtors data.

“The financial hurdles to owning a home have rarely been higher, especially for young households that don’t yet have their foot in the door,” said BMO, according to the report. This reality is reflected in the record-high median first-time homebuyer age, which reached 38 last year.

Why It Matters: The 30-year fixed mortgage rate recently stood at 6.90%, up from 6.81% the previous week and reaching the highest level in two months. This marks a dramatic increase from the 3.5% rates seen before 2022’s spike to nearly 7%, which effectively ended the Covid-era housing boom, the report noted.

Market watchers now look toward potential rate cuts later this year, with CME FedWatch forecasting a 51.1% chance of a reduction in July. However, JPMorgan Chase & Co. analysts remain pessimistic, predicting the housing market will stay “largely stuck” through 2025 unless mortgage rates approach 5%.

The Fed noted in its statement that “uncertainty about the economic outlook has increased further” and “risks of higher unemployment and higher inflation have risen,” introducing new cautionary language that suggests continued policy restraint.

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