Be careful what you wish for when you appoint someone to carry out a task.
It’s no secret that President Donald Trump chose Kevin Warsh as Fed chairman to cut rates, something he hoped would lead to lower housing costs.
But so far, Kevin Warsh has done more harm than good, commenting today that “the prices are too high” during the trip to Portugal.
That sent bond yields soaring, pouring cold water on recent bailouts related to the Middle East conflict.
The question is whether this will be the theme, or whether Warsh will become the Fed chairman that Trump wanted.
New Fed Chairman Kevin Warsh Says ‘Rates Are Too High’
We know that the Fed does not set mortgage rates. It is more concerned with short-term rates and directly rates its corporate funds as such.
However, Fed rate expectations can affect long-term rates such as 10-year bond yields and 30-year mortgage rates.
So if the Fed indicates it is in hike mode, you may see long bond yields and mortgage rates rise as expected.
Conversely, if the Fed shows signs of easing and possible cuts, you may see mortgage rates drive that conversation and come down.
We actually saw this play out last year when the feeders signaled that it was over and cuts were coming.
The 30-year mortgage was around 7% and fell to around 6% in September, just as the first cut took place.
Then mortgage rates jumped on the news and everyone freaked out. Finally, other things happen, like an unexpected hot job report.
What follows is the expectation that Trump will win a second term, and that his policies will be about inflation.
Warsh Was Hired To Be Mortgage Friendly
So there’s only so much influence the Fed can do, but new chairman Kevin Warsh was hired with the express intention of matching interest rates.
Trump has made it no secret that he wants lower mortgage rates. He campaigned on it and has repeated it many times since.
He said he would get mortgage rates back to 3% (or even lower!), but that promise failed to materialize.
And now his choice to do that, Kevin Warsh, is saying things that don’t match the value of real estate.
“Prices are too high,” which tells us that you think inflation is still a threat, and it is the level of HIKES there is a possible answer, not a cut.
That will be the last thing Trump wants to hear, assuming his goal of lowering mortgage rates remains firmly in place.
Will Warsh Finally Get Low Mortgage Rates?
But Warsh is also a manipulative man who has been pushing to change things and play ball with the Trump administration.
In the same interview today in Portugal, he noted that “My hope, my desire, is that in nine-12 months from now we will be using new technologies to understand what is happening in the real economy in a real-time way that puts us as middlemen to make better decisions.”
I heard that Warsh wants to look at economic data differently than the old guard at the Fed.
He also believes that the benefits of AI productivity will lead to less inflation, which will bring about a reduction in prices.
The question is, even if all of this is somewhat true, does it get worse before it gets better?
Should home buyers and existing homeowners looking to refinance their mortgages wait for that to happen? And if so, for how long?
As always, it seems to be a bumpy road with twists and turns and no clear path to relief, regardless of who is in charge.
Buckle up.
Before creating this site, I worked as an account manager for a real estate broker in Los Angeles. My experiences in the early 2000s inspired me to start writing about mortgages 20 years ago to help prospective (and current) home buyers better navigate the mortgage process. Follow me on X for the hottest.
