How Will the New Fed Kevin Warsh Impact Mortgage Rates?

By now, most homebuyers and homeowners have likely become aware that Trump has nominated Kevin Warsh as the next Federal Reserve chair, replacing Jerome Powell. This is a huge decision that will have far-reaching ramifications for the US economy, including mortgage rates.

Let’s go over what to expect. We’ll avoid political discussion in this post, focusing on interest rates and inflation.

Who is Kevin Warsh?

Kevin Warsh is a bank executive and financier. Between 2006 and 2011, he was one of the Federal Reserve governors. So, he has experience from the recession years.

When Will Kevin Warsh Take Over?

Kevin Warsh will take over from Jerome Powell starting in May 2026.

Warsh’s Expected Approach

Warsh is more future-oriented and market-focused than Powell. It is possible he might move rates more aggressively, taking an anticipatory approach. He may have a stronger focus on forecasts, rather than backwards-looking data. He has generally been described as “hawkish” in his approach.

Administration’s Potential Impact

Something else that it is important to be aware of is that the current administration has been pushing for lower interest rates. Trump has expressed dissatisfaction with Powell for not lowering them the way Trump would like.

Whether or not Warsh will do what Warsh believes is best versus what Trump believes is best is unknown at this point. There are a few possibilities:

• Warsh may continue to function independently, setting policy according to what he believes is best for the country.

• Warsh may jump in line with whatever the administration wants him to do, giving up that independence.

If Warsh behaves independently, it is possible his decisions may line up with the administration’s wishes naturally. But it is also possible he might do something entirely different.

Recent Statements About Interest Rates

Warsh at the moment does appear to share the same beliefs and priorities as the administration, which is likely why he has been picked.

In December, Warsh stated that he believes that AI may be a “structurally inflationary” technology, similar to the internet. He expects massive increases in productivity, and thinks that makes lowering rates feasible.

Interestingly, this is a divergence from his previous track record. During his time as a Fed governor, his priority was to keep inflation down.

So, for the time being, we can predict that Warsh may indeed lower rates once he takes over.

Possible Impact on Mortgage Rates

Now, one thing that is important to keep in mind is that there is a difference between interest rates in general, and mortgage rates specifically.

Nevertheless, when interest rates decrease, mortgage rates also usually go down. It’s an indirect effect, and not 1-to-1.

Here is what happens:

• The Fed reduces the federal funds rate.
• Banks’ borrowing costs decrease as a result.
• Banks can afford to charge lower interest rates on their products.
• Interest rates on products like mortgages, credit cards, personal loans, and so on, go down.

The Bottom Line

At the moment, we can predict that it is likely Warsh will lower interest rates. Both his statements, and the fact that the administration wants him, suggest that this is his most likely move.

That means that mortgage rates stand a good chance of decreasing in the future. We do not know how much they will drop. But once we see Warsh in action after he takes over the position, it should be easier to start making predictions about what the Fed will do over the next few years.

Buy a Home or Refinance in Missouri and Beyond

Whether you want to buy now or wait for rates to possibly drop lower, McGowan Mortgages can help you buy a home or refinance in Missouri or 40 other states quickly and easily. To get started, please give us a call at (816) 631-9687 to schedule your consultation.