You’ve likely heard that one of President Trump’s goals is to lower mortgage rates.
He talked about it on the campaign trail before he got elected, and has continued to call for lower rates since winning the election.
Like most others, he is well aware that housing affordability is poor today, and that bringing down rates could help.
But instead of calling on the Fed to do something, he’s apparently going to target the 10-year bond yield.
In case you’re unaware, long-term mortgage rates track really well with 10-year yields, so it’s a good place to start. But will it be successful?
Trump Continues to Call for Lower Mortgage Rates
You probably didn’t see this, but during his campaigning back in September, Trump said, “We’re going to get them back to we think 3%, maybe even lower than that, saving the average home buyer thousands per year.”
While that sounded ridiculous then, and still does today, he hasn’t shied away from continuing to call for lower rates.
Just today on his Truth Social account, Trump added, “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!”
Moments later, the CPI report was released and it came in hot, leading to a big bounce in 10-year Treasury yields (and mortgage rates).
The closely-watched bellwether increased about 10 basis points (bps) to around 4.64%. It was as low as 4.42% a week ago.
The 30-year fixed, which had sunk below 7% last week, is now back closer to 7.125%.
Not exactly what Trump was looking for when he said inflation would cool and rates would fall, though he didn’t necessarily provide a timeline.
Obviously these things take time, but he apparently remains committed to getting consumer borrowing rates lower.
Trump Not Asking the Fed to Lower Rates This Time Around
President Trump sparred with Federal Reserve Chair Jerome Powell during this first term, and was clearly frustrated when the Fed raised rates in 2018.
But this time around, he’s apparently no longer reliant on the Fed. Instead, he’s going to target the 10-year bond yield.
This actually makes sense, because the Fed doesn’t control mortgage rates or long-term rates for that matter.
Instead, its fed funds rate is an overnight borrowing rate used by commercial banks to borrow or lend excess reserves.
However, long-term rates do tend to eventually follow the Fed. So if they’re cutting, mortgage rates often come down. And vice versa.
Of course, this can also happen before the Fed makes a move, based on anticipation.
And if you look at history, mortgage rates often move lower within 12 weeks of a first Fed rate cut.
That didn’t happen this time around though. Instead, mortgage rates went up after the Fed cut, which had many folks baffled.
As for why, it likely had a lot more to do with Trump’s election win and his proposed policies, which many believe to be inflationary, than it did the Fed.
This actually illustrates why the Fed doesn’t control long-term rates, though they could react accordingly in inflation increases.
In other words, they may hold off on additional rate cuts if inflation persists, and if inflation really worsens, they could possibly hike again.
But that wouldn’t mean the Fed was raising mortgage rates. It would simply be reacting to hot economic data, which would have already increased mortgage rates in the first place.
Focusing on the 10-Year Yield to Lower Mortgage Rates Might Be Complicated
So if the Fed is no longer the focus for mortgage rates, what is?
Well, Trump and his newly-appointed Treasury Secretary Scott Bessent say they’re “focused on the 10-year Treasury.”
Bessent said this time around, Trump isn’t asking for the Fed to lower rates, but is instead going to “deregulate the economy.”
And “if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself.”
Basically, they’re saying if they can get inflation lower, long-term mortgage rates should follow, which is basically exactly how it works.
That’s kind of the funny part here. They’re just being logical and pointing out the obvious, instead of blaming the Fed, which doesn’t play a role in mortgage rates historically anyway.
Meanwhile, Chicago Fed President Austan Goolsbee was quoted as saying, “We don’t control long-term rates…What drives long rates is complicated.”
And added that it is instead things like market expectations of inflation, global economic conditions, and Treasury debt issuance.
That’s a bit of a sticking point because, as stated, many believe Trump’s policies are going to be inflationary.
Things like tariffs, which have already been implemented on China, along with deportations that could drive up home building costs.
There’s also the thought of higher Treasury debt issuance if Trump tax cuts materialize, despite efforts to reduce federal spending via the Department of Government Efficiency (DOGE).
Ironically, this could result in increased unemployment, which is another (undesirable way) to get the 10-year bond yield and mortgage rates down.
But so far, the market, aka bond investors, are banking on higher inflation and thus higher bond yields under Trump.
Despite what Bessent says, the 10-year bond yield has risen about 100 bps since September, just before it appeared Trump was the frontrunner to win the election.
That means there’s a lot of speculation built into yields, much of it higher inflation expectations.
But if they can truly rein in the spending and get inflation lower, it could also be unwound. And that could get Trump to his goal of lower mortgage rates.
Not necessarily anywhere close to those promised 3% mortgage rates. But at least back to the low-6 or even high-5% range. And that could be enough to save the housing market.
Read on: What Will Happen to Mortgage Rates During Trump’s Second Term?
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 19 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.
