Will the new Fed chairman affect mortgage rates?
Federal Reserve Chairman Kevin Warsh will preside over the first meeting of his term this week in a widely watched session of the influential banking board.
Appointed by President Donald Trump to replace outgoing Chairman Jerome Powell, Warsh generally is perceived as open to lower interest rates.
He’s only one vote, however, on a board of 12. Many Fed watchers expect rates to stay about where they are even after the Fed issues its recommendations after the meeting.
With mortgage interest rates at a one-month low at the start of this week, potential homebuyers are seeing a path toward homeownership widen even further. Even a small dip in mortgage interest rates could save borrowers thousands over the life of their home loans.*
Are you ready to start your homeownership journey? Apply now to learn how much you could qualify to borrow.
Who is Kevin Warsh?
Warsh is a Fed governor on a 14-year term who will serve for four of those years as chairman.
His background includes a previous term on the Fed’s board of governors as well as advisory roles during President George W. Bush’s administration.
He holds degrees from Stanford University and Harvard Law School. He’s served as a lecturer at Stanford as well.
Why does the leadership change at the Fed matter?
The Fed is a prominent voice in the banking world. Its recommendations based on inflation rates and other market forces can influence decisions across many financial sectors.
While appointments by presidents are inherently political, the Fed generally is viewed as nonpartisan and independent.
Keep in mind that Powell also was appointed by Trump, and the two often clashed on the direction that rates should take. It remains to be seen whether Warsh’s influence on the board will mirror Trump’s desire for the Fed to recommend further trimming rates.
What are Warsh's views on interest rates and inflation?
Warsh has indicated in the past that he is generally in favor of cutting rates. But with inflation creeping upward, experts suggest the Fed board as a whole is unlikely to recommend a rate cut.
The Fed board generally abides by a rule of not lowering interest rates until inflation is at or below 2%. Warsh is regarded as taking a “neutral” approach when it comes to inflation, so a push from him to cut rates with inflation hovering about 4.2% in seen as less likely as well.
What could it mean for mortgage rates?
If the Fed recommends rates stay about where they are, mortgage rates likely won’t adjust very much after the board’s meeting this week.
The good news for potential homebuyers and homeowners looking to refinance is that mortgage interest rates hit a one-month low this week. That means that even without a recommendation of a rate cut from the Fed, mortgage rates appear to be on a downward trend.
Those lower rates alone could save borrowers thousands of dollars in interest payments over the life of their home loans.
The only potential negative is if the Fed recommends an increase in rates to try to tame inflation. That’s a move that’s seen as less likely, but if it happens, it could push mortgage interest rates slightly higher again.
What is the potential effect on homebuyers and homeowners?
If you’re considering purchasing a home or are a homeowner looking to trim your monthly payments, this could be a good time to act.
The Fed’s actions have influence, and a new chairman could bring in a more aggressive approach. But mortgage interest rates don’t always track with Fed recommendations.
Rates are currently dropping some, and more homes are on the market for buyers to choose from. The timing might be right to get pre-approved and learn how much you could qualify to borrow.
How can I start a home loan, refinance or HELOC today?
Pre-approval is a key first step in your homeownership journey.
Once your lender reviews your finances, you’ll know how much you qualify to borrow for a home purchase or refinance. That allows you to shop with the confidence that the home you choose will be within your budget.
Apply now to get started!
If you already own a home and want to tap into the equity you’ve built up over the years, a home equity line of credit (HELOC)** can put cash into your pocket in as little as five days.***
A HELOC offers a flexible way to borrow, much like a credit card but generally with lower rates. You can draw what you need when you need it, and you have time to pay back.
Once you apply for a HELOC, a professional Loan Officer can help you through the rest of the borrowing process.
* Savings, if any, vary based on the consumer’s credit profile, interest rate availability, and other factors. Contact Rate for current rates. Restrictions apply.
**Rate's HELOC is a fixed-rate open-end product using your home as collateral. Not available in all states. Go to rate.com/HELOC for information including important property and borrower requirements and restrictions which impact rate and max available loan amount. Subject to approval.
*** Applications may be completed in five minutes but may fluctuate. Five business day funding timeline assumes closing the loan with our remote online notary. Funding timelines may be longer for loans secured by properties located in counties that do not permit recording of e-signatures or that otherwise require an in-person closing. In addition, funding timelines may be longer if we cannot readily verify that your property is in at least average condition with no adverse external factors with a property condition report and may need to order a desktop appraisal to confirm the value of your property. Texas borrowers will have a 12-day cooling period prior to closing on their home equity loan which will begin after the borrower has both filed a loan application and received consumer disclosures.
Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.
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