Mortgage rates are likely set to rise again.

The U.S. Federal Reserve is poised to hold interest rates steady for longer than expected because inflation has remained stubbornly high. That could mean the Fed won’t cut rates this year or will cut them fewer times than many had predicted.

This could result in mortgage rates edging back up to 8%, says Realtor.com® Chief Economist Danielle Hale.

“We’ll need greater confidence that inflation is moving sustainably towards 2% before [it will be] appropriate to ease policy,” Fed Chair Jerome Powell said Tuesday during a panel talk. “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve that confidence.”

The Fed’s interest rates and mortgage rates are separate from one another, but mortgage rates tend to follow the same trajectory. So when the Fed increases or decreases its rates, mortgage rates often follow.

“A lot of what happens will depend on how the next couple inflation readings come in,” says Hale. “If inflation goes down, mortgage rates will start to ease back down.”

But she adds that “if it gets worse, 8% is definitely possible for mortgage rates.”

Mortgage rates had fallen to an average 6.62% in mid-December after the Fed indicated that rate cuts were on the way, according to Mortgage News Daily. Mortgage rates have since jumped up, averaging 7.5% on Tuesday, according to the publication.

The Fed’s rates are now at a 23-year high. Powell said policymakers can keep those rates steady for “as long as needed.”

Hale is optimistic that inflation will start moderating again. If that happens over the next few months, the Fed is expected to begin cutting rates. Then mortgage rates are likely to come back down.

In the meantime, buyers and sellers will have to navigate a pricier spring housing market.

It’s not just mortgage rates that are elevated; home prices are also high. The median list price was $424,900 in March, according to most recent Realtor.com data.

“This mortgage rate increase is coming at the worst time of the year,” says Hale. “Costs are probably causing many buyers to hold off on plans.”

The post The Fed Is Poised To Hold Interest Rates Steady—Here’s What That Will Do to Mortgage Rates appeared first on Real Estate News & Insights | realtor.com®.