Trump’s Fed fight aims to resolve the housing market’s woes — but could make it worse
September 6, 2025 | by ltcinsuranceshopper
In Federal Reserve Chairman Jerome Powell’s view, the Fed isn’t responsible for the woes of the housing market.
“Housing is a special case,” he said in July. “We don’t set mortgage rates at the Fed, right?”
It’s the country’s long-running housing shortage, Powell argued, that is to blame for today’s affordability challenges. “I think the best thing that we can do for housing is to have 2% inflation and maximum employment,” Powell said.
President Trump, however, doesn’t see it that way. Since taking office in January, he’s attacked Powell dozens of times, blaming him and the rest of the Federal Reserve board for holding interest rates high and “choking out the housing market.” Last week, he took his attacks a step further, moving to fire Federal Reserve governor Lisa Cook, his boldest effort so far to shape the Fed into an entity that matches his economic goals.
A board stacked with Trump appointees could very well cut benchmark rates — but that doesn’t guarantee that mortgage rates will follow. In fact, if investors lose confidence in the central bank, interest rates of all kinds, including mortgage rates, could spiral higher.
“If the central bank is no longer independent and they’re slashing the fed funds rate even though they shouldn’t be…then long-term rates — the 10-year Treasury yield and 30-year mortgage rates — will actually go up a lot,” said Chen Zhao, the head of economics research at Redfin. “Markets will be looking forward to the future and saying, ‘Actually, in the future, rates will be a lot higher.’”
Read more: How the Federal Reserve rate decision affects mortgage rates
Trump has been ratcheting up pressure on Powell for months, but the effort to fire Cook, who has filed a lawsuit to keep her job, originated with Bill Pulte, the 37-year-old head of the Federal Housing Finance Agency.
The FHFA is an obscure but vital part of the US housing market. It regulates Fannie Mae and Freddie Mac, the two companies that support homeownership by buying up the vast majority of the country’s mortgages.
Pulte has emerged as one of Trump’s staunchest defenders and has repeatedly echoed the president’s criticisms of the Fed and its interest rate decisions.
Director of the Federal Housing Finance Agency Bill Pulte walks outside the White House on Tuesday. (AP Photo/Mark Schiefelbein) ·ASSOCIATED PRESS
He’s the grandson of the founder of PulteGroup (PHM), one of the nation’s largest homebuilders. Since taking office in January, he’s ousted the boards of Fannie Mae and Freddie Mac and named himself chairman, and accused several Trump critics, including New York Attorney General Letitia James and California Sen. Adam Schiff, of mortgage fraud.
In late August, he set his sights on Cook, alleging she listed two separate properties as her primary residence when taking out mortgages on those homes. Mortgage rates on primary residences are usually lower than those on second homes or investment properties.
“How can we get rid of mortgage fraud by Average Americans in this Country if a Fed Governor can ‘get away with it’?” Pulte posted Tuesday on X.
Today’s high mortgage rates are just one reason home sales have been stuck near 30-year lows for two straight years, and affordability remains near all-time lows. Homebuilders pulled back activity during the financial crisis and the years that followed, leaving the nation with too few homes even as its population continued to grow.
During his campaign, Trump said he’d bring down housing costs by encouraging building and opening more federal lands for housing, cracking down on undocumented immigration, and lowering mortgage rates and prices. Since taking office, he’s been particularly focused on mortgage rates, which have been in the 6.5%-7% range this year.
“Could somebody please inform Jerome ‘Too Late’ Powell that he is hurting the Housing Industry, very badly? People can’t get a Mortgage because of him,” Trump posted on Truth Social Aug. 20.
A series of dramatic Fed rate cuts would likely send short-term government bond yields lower by making it cheaper to borrow. That could certainly reignite economic activity, as Trump wants, but it comes with its own set of affordability risks.
Take the period during the pandemic, when the Fed slashed interest rates to near-zero to help jumpstart a nearly frozen economy, then kept rates there for two years. Mortgage rates fell below 3%, and those ultra-low rates coupled with demand for more space during lockdowns set off a homebuying frenzy that sent prices soaring.
By early 2022, the median home sold for $413,500, up 26% from $329,000 just two years earlier, according to Census Bureau data.
Dan Frio, a mortgage adviser in St. Charles, Ill., said he isn’t eager to return to those times, even though he was busier then than he is now. He fears that any return to ultra-low mortgage rates could unleash a new wave of demand and send prices skyrocketing again.
“I don’t want home prices to keep flying up,” Frio said. “I don’t want rates to be 2% again, because it’ll be at a point where you won’t be able to afford to buy a house.”
Read more: When will mortgage rates go down?
The Fed is in a tough spot now, because the labor market is weakening — usually a sign to cut rates — while inflation is still running above the Fed’s 2% target. A dramatic rate cut now risks accelerating inflation. Higher inflation lifts bond yields, especially the longer-dated ones that are most closely linked to mortgages, because investors demand more compensation when their purchasing power falls.
“We would see — as we already have — increases in medium- and long-term market interest rates reflecting well-founded market worries that Fed rate cuts combined with exploding federal government deficits will fuel higher rates of inflation,” said Brett House, an economics professor at Columbia Business School.
Yields could also rise if a less independent Fed causes investors to lose faith in the US as an investment. Most countries with advanced economies have an independent central bank because being free from political influence allows central bankers to make potentially unpopular decisions like hiking interest rates.
“Fed independence is very, very important, and I’m not making a political statement,” said Christopher McGratty, head of US bank research for KBW. “It is really important to see the Fed be able to freely implement its dual mandate of employment and inflation management.”
Pulte, meanwhile, continues his pressure campaign in earnest, attacking Cook in cable TV appearances and relentless X posts.
“I’m not going to be intimidated from pursuing mortgage fraud just because somebody has the special title of being a Fed governor,” he said during an appearance on CNBC on Thursday.
Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance. David Hollerith contributed reporting.
