Trump’s Plan To Lower Mortgage Rates Could Run Into Trouble
President Donald Trump has spent over a year pushing for lower mortgage rates, growing increasingly frustrated with the Federal Reserve’s chair, Jerome Powell, over the central bank’s refusal to cut interest rates until mid-September.
After a very public row with Powell, the president has chosen a new chair for the Fed, Kevin Warsh. But his pick might actually go the opposite direction than the one Trump might wish for, experts have said.
What Do We Know About Warsh?
Warsh, a 55-year old former Fed governor and Wall Street veteran, is set to replace Powell once his term ends in May. He has an impressive curriculum: in 2006, at the age of just 35, he was serving as executive secretary to the National Economic Council (NEC) after President George W. Bush appointed him the youngest governor in the Federal Reserve’s 112-year history.
Announcing his nomination on his social media platform Truth Social late last month, Trump said he has known Warsh “for a long period of time” and has “no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best.”
While Trump has picked his candidate, Warsh must still be confirmed by the Senate before officially becoming the Fed’s new chair.
What Could Warsh Do at the Fed’s Helm?
While he has occasionally advocated for interest rate cuts and been critical of the current Fed’s leadership, and is considered close to Trump ideologically, Warsh has also been known to criticize the central bank’s significant bond portfolio as bloated.
After the financial crisis sparked by the subprime mortgage crisis of 2007-2008, the Fed embarked on important “quantitative easing” operations, embracing an unconventional monetary policy involving the purchases of government bonds to push up their prices and bring down long-term interest rates.
Between 2008 and 2022, the Fed’s assets climbed from $900 billion to roughly $3 trillion. As of last week, they were around $6.6 trillion.
Warsh has previously stated that, in his opinion, the crisis-era efforts—including the ones undergone during the pandemic—contributed to fueling inflation.
In a speech given by Warsh in April 2025, “he contended that the Fed has expanded well beyond its statutory remit, transforming itself from a disciplined central bank into a broad governmental actor involved in fiscal, political, and social domains,” Jeffrey Roach, chief economist for LPL Financial, said in statements shared with Newsweek.
“Warsh warned that this institutional drift has undermined price stability and contributed to outsized federal spending,” he added.
Warsh called for “a strategic reset of central banking—returning focus to fundamentals, limiting discretionary power, reestablishing accountability, and restoring intellectual rigor,” Roach said.
If he were to make a serious attempt to shrink the Fed’s $6.6-trillion balance sheet of Treasury bonds and mortgage-backed securities, this move could bring up mortgage rates—the exact opposite of what Trump is hoping for.
“If all he does is move to a smaller Fed balance sheet, it’s hard to see how that would be consistent with lower mortgage rates, and that creates some tension with the president,” Bill English, a Yale professor and former director of the Fed’s division of monetary affairs, told The Washington Post.
But other experts are skeptical that Warsh’s position will not change once installed as the Fed’s next chair.
“In the past, Mr. Warsh has talked a good game about the need to rein in Wall Street excesses through stronger regulations that protect the public from excessive risk-taking and taxpayer-funded bailouts. But if confirmed, he would be joining an administration that has made financial deregulation and debt-fueled financial speculation centerpieces of its economic policy agenda,” Graham Steele, academic fellow at Stanford University’s Rock Center for Corporate Governance and former assistant secretary of financial institutions at the U.S. Department of the Treasury, said in a statement shared with Newsweek.
“The public needs to know whether Mr. Warsh will have the courage of his convictions or if he’s willing to compromise his independence and accommodate more Wall Street deregulation.”
Where Do Experts Think Mortgage Rates Are Headed?
The Fed’s decisions have a massive, indirect influence on mortgage rates, but other factors also play a role, including economic sentiment and the health of the housing market, which has been sluggish for the past several months.
By the end of 2025, experts expected mortgage rates to lower slightly but remain at or above the 6 percent mark. But the political situation in the country could have an influence on what happens next.
“Mortgage rates are not directly set by the Fed but instead reflect long-term yields, which respond to shifting economic signals, market sentiment, and perceived risks. If investors grow uncertain about the Fed’s intentions or begin to question its independence, long-term yields can rise even during a rate-cutting cycle,” Realtor.com senior economist Anthony Smith said in a statement shared with Newsweek.
“That paradox underscores the risk of mixing political objectives with monetary policy. For housing, that means aggressive calls for rate cuts may not lower mortgage rates unless market confidence in the Fed’s inflation-fighting credibility remains intact.”
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