What Jerome Powell’s Replacement Could Look like for Mortgage Rates

What Warsh might mean for interest rates

1. Markets are still figuring it out — and that drives rates.
Mortgage rates don’t move directly because the Fed changes its policy rate — they’re largely driven by long-term Treasury yields and market expectations. The bond market is already reacting to Warsh’s nomination, which can push long-term yields (and thus mortgage rates) higher even before any actual policy shift.

2. Ambiguous signals don’t calm markets.
Warsh has a complex track record — historically more hawkish (focused on inflation control) but recently signaling openness to lower rates. This mixed message creates uncertainty, and uncertainty tends to raise long-term yields because investors demand a premium for risk.

3. Fed independence and communication matter.
A big theme from economists is that a Fed perceived as driven by politics rather than data can increase term premia — meaning higher rates — even if policymakers are trying to lower short-term rates.

What it doesn’t mean for mortgage rates

• It doesn’t guarantee a big drop in mortgage rates. Even if the Fed cuts its benchmark rate under Warsh, long-term rates (what most mortgages track) could stay elevated if inflation expectations don’t fall or if the balance sheet shrinks.

• Mortgage rates aren’t set by the Fed. They’re set by the market — investors buying and selling 10-year Treasuries. So market sentiment and inflation expectations often matter more than the Fed’s overnight rate.

So What Might Happen?

Short-term: Expect volatility. Many investors are pricing in both potential rate cuts and higher long-term yields due to uncertainty about policy direction. This tug-of-war can keep mortgage rates elevated or choppy.

Medium-term: If Warsh and the rest of the FOMC signal clear data-driven policy — meaning rate cuts only if inflation materially falls — markets could gradually price in a path to moderately lower long-term rates. But that’s far from certain and likely not immediate.

Long-term: Mortgage rates could soften if inflation comes down sustainably and global investors have confidence in stable, predictable policy — but that often takes time and consistent data, not just a new Fed chair.

Bottom line: Warsh’s nomination introduces uncertainty that can push long-term rates higher, even if the Fed eventually cuts its policy rate. There’s no straight line from his appointment to significantly lower mortgage rates, especially in the near term — and markets are already reacting to that ambiguity.