Mortgage Rates Hold Steady—But for How Long? The Fed’s Decision Explained

At its latest meeting on May 7, 2025, the Federal Reserve decided not to change interest rates — again. For many people, especially those thinking about buying or selling a home, this might sound like complicated financial news. But it has very real effects on your mortgage, your buying power, and the overall housing market.

Here’s what’s going on, in plain English.

What Is the Federal Reserve and Why Do Rates Matter?

The Federal Reserve (or “the Fed”) is like the steering wheel for the U.S. economy. When inflation is too high, they raise interest rates to slow things down. When the economy is struggling, they may lower rates to help things pick up.

The Federal Open Market Committee (FOMC) meets regularly to decide whether to raise, lower, or hold these rates. Right now, they’ve chosen to hold rates steady at 4.25% to 4.5% — the same range it’s been for three meetings in a row.

What Did Jerome Powell Say?

Fed Chair Jerome Powell said that the economy is growing, but there are big uncertainties — especially from new tariffs (taxes on imports) and other global economic pressures.

Here are the key takeaways:

• Inflation is still a concern, so the Fed doesn’t want to lower rates yet.

• New trade tariffs could slow inflation progress, possibly delaying any future rate cuts by up to a year.

• Powell also made it clear that the Fed is independent — it won’t bow to political pressure, even as President Trump publicly calls for rate cuts.

What Does This Mean for Mortgage Rates?

Mortgage rates don’t exactly follow the Fed’s decisions, but they’re influenced by them. Here’s how it breaks down:

• When the Fed holds rates steady, mortgage rates tend to level off or rise slightly.

• If inflation fears continue, lenders may keep mortgage rates higher to protect against risk.

• Don’t expect major drops in mortgage rates anytime soon — buyers and refinancers should plan accordingly.

So, if you’re house-hunting or considering a refinance, don’t wait around for a big drop. Rates might stay right where they are for a while.

What About the Housing Market?

Holding rates steady affects the housing market in a few ways:

1. Home Prices May Stay Flat or Grow Slowly

• Higher mortgage rates reduce how much buyers can afford, which can put a lid on rising home prices.

2. Buyers May Be More Cautious

• Some buyers might hesitate, hoping for lower rates. But others will jump in now, not wanting to risk rates going even higher.

3. Sellers Might Need to Adjust

• With fewer bidding wars and buyers stretching budgets, sellers may need to price homes more competitively.

4. Investors and Renters

• Real estate investors watching mortgage rates will be cautious, and rental demand could stay strong if fewer people buy.

Bottom Line: What Should You Do?

Even though the Fed didn’t change rates, the message is clear: they’re playing it safe. That means we could be in a “wait and see” period for the rest of the year.

If you're a buyer: Focus on finding the right home, not timing the market. Today’s rates might be as good as it gets for a while.

If you're a seller: Be realistic about pricing. A slower market means buyers are more selective.

If you're an investor or renter: Keep an eye on demand. Stable rates may create opportunities — but you’ll need a smart, local strategy.

Need Help Making Sense of the Market?

Whether you’re buying, selling, investing, or just exploring your options, we’re here to help.

Contact us below for expert guidance on how today’s market affects you — and how to move forward with confidence.

FHA Tightens the Rules: Non-Permanent Residents No Longer Eligible for FHA Loans

FHA loan access denied: A new policy change bars non-permanent residents from eligibility starting May 25, 2025.

In a major policy shift, the Federal Housing Administration (FHA) has updated its residency requirements, narrowing the eligibility for FHA-insured loans. Effective for case numbers assigned on or after May 25, 2025, this change eliminates eligibility for non-permanent residents, limiting FHA financing to U.S. citizens, lawful permanent residents, and select citizens from specific Pacific Island nations. Here’s what that means for buyers, lenders, and real estate professionals.

🏠 What Changed?

According to Mortgagee Letter 2025-09, FHA has:

✅ Eliminated eligibility for non-permanent residents.✅ Updated documentation requirements for permanent residents and Pacific Island citizens.✅ Revised sections of the FHA Single Family Housing Policy Handbook (HUD Handbook 4000.1) to reflect these changes.✅ Aligned its policies with recent federal executive priorities, focused on protecting long-term financial stability and government-backed loan integrity.

📌 Who Is Still Eligible?

The following groups can still access FHA-insured mortgage products:

• U.S. Citizens

• Lawful Permanent Residents (must provide USCIS documentation)

• Citizens of the Federated States of Micronesia, the Republic of the Marshall Islands, and the Republic of Palau

These individuals are subject to the same underwriting requirements as U.S. citizens, and their mortgage files must include proof of eligibility and updated documentation via the Uniform Residential Loan Application (URLA) or Reverse Loan Application (RLARM), depending on the product.

❌ Who No Longer Qualifies?

Non-permanent residents—those holding temporary visas or uncertain immigration status—are no longer eligible for FHA-insured loans under any Title II Single Family programs, including:

• Forward Mortgages

• Home Equity Conversion Mortgages (HECM) (aka reverse mortgages)

• Streamline Refinances, even in non-credit qualifying situations

🔍 Why the Change?

The stated rationale is that non-permanent residency carries immigration-related uncertainties that may compromise a borrower’s long-term ability to meet mortgage obligations. Since FHA-insured loans are long-term federal commitments, HUD has determined that stable and lawful residency is a necessary criterion to safeguard taxpayer resources and program integrity.

The policy also reflects broader federal priorities to reserve government benefits for U.S. citizens and lawful permanent residents, as emphasized in recent executive actions.

💼 Implications for Real Estate Pros and Lenders

If you're a real estate broker, loan officer, or housing counselor, you need to:

• Review all applications carefully for updated residency documentation.

• Educate potential borrowers—especially those with unclear immigration statuses—on their financing options.

• Update internal checklists and loan application review processes by the May 25, 2025 effective date.

Lenders must also remove previously applicable underwriting procedures for non-permanent residents from their internal policies.

📅 Effective Date

The new residency rules must be applied to all FHA case numbers assigned on or after May 25, 2025. Early adoption is allowed but not mandatory prior to that date.

📝 Final Thoughts

This shift could significantly affect many aspiring homeowners who previously qualified under non-permanent resident guidelines. It’s more important than ever for real estate professionals and housing counselors to stay updated, clarify borrower qualifications early in the process, and assist clients in finding the most suitable financing paths.

For more information, visit the official NAR Update on Residency Changes or read Mortgagee Letter 2025-09.

DOGE's Office Closures, Contract Cuts, and What They Mean for CT Real Estate

Federal downsizing meets local reality: As government offices scale back in Connecticut, housing markets may feel the ripple effects.

A wave of federal lease cancellations across Connecticut—totaling nearly $1 million—is making waves beyond the political sphere. Part of a broader $115 billion cost-cutting initiative by a newly formed federal office focused on government efficiency, these changes could have meaningful impacts on the local housing landscape.

In cities like Stamford and New London, six federal offices are being vacated, including locations previously occupied by the Environmental Protection Agency and administrative law judges. While these cuts may sound like bureaucratic reshuffling, they could actually open new doors—or close others—for local buyers, sellers, and investors.

📉 Government Exit, Real Estate Opportunity?

The exit of federal tenants from city centers could unlock new potential in underutilized spaces. Office buildings that once housed federal agencies may be repurposed or rezoned for residential, mixed-use, or community development.

For buyers and developers, this could translate into rare investment opportunities in well-located areas—particularly in cities rethinking how they use commercial space post-pandemic. These vacancies might serve as the catalyst for affordable housing projects, multi-family units, or even new neighborhood amenities.

💼 Job Market Shifts = Housing Market Shifts

In addition to the lease cancellations, approximately $176 million in federal contracts with Connecticut-based businesses have been terminated. One of the state’s major contractors is losing nearly $70 million in funding alone.

That kind of economic shift could reverberate through local job markets—especially in regions tied to federal work or support services.

For homebuyers, this could bring both risk and reward: job market uncertainty might affect income stability and lending qualifications, but it could also ease competition and put downward pressure on home prices in certain areas.

🕒 Should Sellers List Sooner Than Later?

For sellers—particularly those near impacted federal sites—this may be a strategic moment to consider listing.

Government tenants often bring a reliable source of activity to surrounding neighborhoods. Their sudden departure could create short-term hesitancy among buyers or limit demand, potentially softening prices. Getting ahead of those ripple effects could help homeowners sell before the market adjusts.

🔍 Bottom Line

Federal cost-cutting may seem like a faraway issue, but its effects can show up right in our neighborhoods—in the form of vacant buildings, shifting demand, and emerging real estate opportunities.

Whether you're buying, selling, or simply watching the market, these changes are worth tracking. Because when the public sector steps back, it often creates space for something new to move in—and smart players in the housing market will be ready.

Contact us below to find out how you can make the current political and economic climate work for you.