Bank of America’s Matt Vernon urges homebuyers to focus on budget and long-term goals as borrowing costs stay elevated
The Federal Reserve held its benchmark rate at 3.75% to 4.00% on October 28, giving US mortgage borrowers little immediate relief and leaving December as the next critical inflection point for housing market costs.
Matt Vernon (pictured top), head of Consumer Lending at Bank of America in Charlotte, North Carolina, said the decision reflects the difficult balance policymakers are navigating.
“The Fed’s decision to hold rates steady reflects policymakers’ efforts to balance inflation against the risk of slowing economic growth,” Vernon told Mortgage Professional America.
“BofA Global Research expects another 25-basis-point rate hike in December, so borrowers should be prepared for borrowing costs to remain elevated.”
The hold was widely anticipated. CME FedWatch placed the odds at 90.6% ahead of the decision, as MPA’s coverage of the Fed’s October rate decision and its conflicting mandates outlined.
The Bureau of Labor Statistics reported September’s Consumer Price Index at 3.7% annually, nearly double the Fed’s 2% target, while payrolls added just 29,000 jobs, pushing unemployment to 4.2%.
December remains the live question
The October pause has done little to resolve what comes next, with CME FedWatch pricing in a 76.5% probability of a 25-basis-point increase at year-end.
Eric Orenstein, Senior Director at Fitch Ratings in New York, said the mortgage origination market will feel the pressure regardless.
“Short-term rates were held flat today but the market expects tighter monetary policy down the line, propping up mortgage rates above 7% for the near term,” Orenstein said.
“We expect the smaller origination market in 2027 to limit earnings upside for mortgage companies.”
Freddie Mac’s 30-year fixed averaged 7.32% as of October 22, while mortgage applications declined 5.3% in the week ending October 16, the Mortgage Bankers Association (MBA) reported, a sign that even modest rate relief has not been enough to restore demand.
What brokers should tell clients now
Vernon’s message for homebuyers and current borrowers is direct: focus on what your finances can sustain, not on where rates may move next.
“While inflation has come down from its peak, underlying price pressures remain above the Federal Reserve’s target, and a stable labor market has given policymakers flexibility to maintain a restrictive stance,” Vernon said.
“For prospective homebuyers, the most important thing is to focus on what fits their budget and long-term financial goals rather than trying to time the market. It’s also important to understand the resources available to help reduce upfront costs, including down payment and closing-cost assistance programs that can improve affordability regardless of where rates move in the near term.”
Melissa Cohn, Regional Vice President at William Raveis Mortgage in New York and a 44-year industry veteran, said December’s meeting is now the pivotal date for the mortgage market.
“The bond market expected the Federal Reserve to leave interest rates unchanged at today’s meeting, but anticipates one or two rate increases in the coming months, possibly beginning in December,” Cohn said.
“Where mortgage rates go next will largely depend on oil prices and the war in Iran.”
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