Will Trump’s Shadow Fed Chair Drop Mortgage Rates?

As Wall Street braces for a pivotal shift at the Federal Reserve, mortgage borrowers are watching with a different question in mind: Could a Trump-picked Fed Chair—or even a “shadow” one—finally bring mortgage rates down?

This isn’t a hypothetical. In recent days, former President Donald Trump reignited his feud with Jerome Powell, calling the current Fed Chair “terrible” and “very stupid,” while confirming he’s narrowed down a list of three or four successors. Powell’s term doesn’t expire until May 2026, but Trump is reportedly exploring ways to influence rate policy sooner—perhaps by installing a political ally as a “shadow chair” to pressure the Fed from within.

It’s a headline-grabbing drama—but beneath the political fireworks is a serious question: Could this power struggle actually lead to lower mortgage rates in 2025? If you're a homeowner or considering homebuying in Austin, the answer could directly impact your finances.

No Love Lost: Why Trump Loathes Powell—and Why Powell Doesn’t Care

Trump and Powell have a long history—and it’s not a warm one.

Although Trump appointed Powell in 2017 to lead the Federal Reserve, he quickly soured on him during his first term. Trump frequently blasted Powell for not cutting interest rates fast enough, even as the economy expanded. In 2019, Trump publicly asked whether Powell or Chinese leader Xi Jinping was “a bigger enemy” to the U.S. economy.

That tension has only escalated in Trump’s second term.

In recent months, Trump has labeled Powell a “major loser,” “numbskull,” and “Mr. Too Late,” accusing him of sabotaging the economy by keeping interest rates too high even as inflation cools. He’s even suggested Powell’s termination “cannot come fast enough”—despite the fact that the Fed Chair is legally protected from being fired without cause.

Powell, for his part, has not budged. In a recent Congressional hearing, he reaffirmed the Fed’s independence and stressed that the central bank needs to “see more evidence” before cutting rates, particularly due to concerns about Trump’s new global tariffs fueling future inflation.

In other words: Trump wants cheaper money now. Powell wants more data. And neither one is backing down.

Why This Matters to Mortgage Borrowers

The Fed doesn’t set mortgage rates directly, but its policies have an outsized influence. When the Fed hikes its benchmark interest rate, yields on Treasury bonds tend to rise—and mortgage rates often follow.

Over the past two years, the Powell-led Fed has kept rates elevated to combat inflation. The result? Mortgage rates topping 7%, the highest in over two decades. That’s priced millions out of homeownership.

And despite recent signs of economic cooling, Powell still isn’t giving borrowers much relief.

At the June 2025 Fed meeting, Powell and his colleagues held the benchmark rate steady for the seventh consecutive month. While the Fed's dot plot suggests two cuts might happen later this year, seven of the nineteen voting members don’t want any cuts at all. The committee also downgraded its economic growth forecast and raised its inflation expectations—a signal that the Fed is prepared to hold firm.

Powell’s reasoning? He wants to wait for more data. Specifically, he's watching for signs that tariffs from the Trump administration’s trade agenda could reignite inflation. That means even if inflation looks under control now, Powell is in no rush to help homeowners stuck with 7%+ mortgage rates.

Trump, meanwhile, is tired of waiting—and tired of being ignored. He’s made it clear that Powell's caution is, in his view, a costly mistake. To Trump, every month without a cut is a missed opportunity to jumpstart growth, reduce debt costs, and reenergize the housing market. And Powell’s refusal to bend to that view has only deepened the rift between them.

Powell might have been homebuyers' best friend during the pandemic, but he's been no friend since—or to those looking to refinance off their 7% mortgage. His commitment to keeping rates "higher for longer" is a signal to the market: don't expect easy money any time soon.

Now, with Trump stepping up his attacks and floating names for a more aggressive, pro-growth Fed pick, borrowers are left wondering: could relief finally be on the horizon?

Who’s on Trump’s Fed Shortlist?

According to Reuters and CNBC, Trump’s top candidates include:

• Kevin Warsh – Former Fed governor (2006–2011) with Wall Street experience and a reputation for pro-growth, market-friendly policies. Warsh is seen as pragmatic and independent, which could make him more cautious about aggressive cuts—but still more flexible than Powell.
• Kevin Hassett – Former chair of Trump’s Council of Economic Advisers and a vocal advocate for tax cuts and stimulus. Hassett would likely support fast rate reductions to boost economic growth and affordability, especially in the housing market.
• Scott Bessent – Currently serving as Treasury Secretary and known for his close alignment with Trump. Bessent has floated the idea of a "shadow Fed chair" who could issue public guidance to steer markets even before Powell’s term ends. He’s a strong advocate for immediate rate relief.
• Christopher Waller – Sitting Fed governor and one of the most dovish voices on the Board. Waller has already said the Fed could begin cutting rates “as early as July,” citing cooling inflation and stagnant goods prices. His presence at the Fed makes him the most likely to influence policy in the short term.

Even without a formal appointment, these candidates—particularly Waller—could shape public expectations and put pressure on Powell’s more cautious approach.

What Could This Mean for Mortgage Rates?

It’s rare to see politics so directly impact monetary policy, but this year is anything but typical.

If a Trump-aligned Fed candidate begins championing immediate rate cuts—or if traders begin betting that Trump will appoint a rate-slashing chair in 2026—markets may move ahead of the Fed.

We could see:

• Bond yields fall, especially at the short end of the curve.
• Mortgage rates dip, perhaps below 6% if expectations shift quickly.
• Increased refinance activity as homeowners try to get ahead of further movement. Many borrowers who locked in at 7% or higher may seize the opportunity to refinance into more favorable terms—especially if rate forecasts start trending lower.
• Buyers re-enter the market, especially those who’ve been sitting on the sidelines since rates spiked in 2023–2024. With even modest rate relief, affordability improves and competition could heat up fast.

Of course, all of this hinges on confidence. If the Fed is seen as being politicized or undermined, volatility could rise—and rates could swing wildly in both directions.

Should You Wait for Rates to Drop?

That’s the million-dollar question. If you’re a buyer, here’s how to think about it:

• Waiting for rate cuts may save you money—but only if home prices stay flat or fall.
• Buying now and refinancing later gives you the benefit of locking in a home before prices potentially rebound.
• If you're already in contract, don’t count on big rate swings before your close date—these moves tend to play out over months, not days.

But no matter where you are in your homebuying journey, one thing is clear: you need to stay on top of the market. Mortgage rates move fast—and political uncertainty can add fuel to that volatility. Weekly insights can make a big difference.

That’s why we created the LendFriend Rate Alert—a free text service that delivers our sharpest rate pricing every Friday, plus market context you won’t find anywhere else.

📱 Sign up here to get ahead of market moves and make smarter decisions, without the noise.

At LendFriend Mortgage, we believe the best mortgage is one that’s affordable and adaptable. Whether you’re hoping to lock in a low fixed rate, take advantage of interest-only options, or prepare to refinance later, we can help you navigate the landscape with confidence. Especially if you're searching for a trusted mortgage broker in Austin, our team is here to help.

Final Takeaway

Trump’s potential Fed shakeup has major implications—not just for Wall Street, but for homebuyers, sellers, and investors across the country.

Whether you see it as smart monetary strategy or political interference, one thing is clear: the Fed isn’t operating in a vacuum anymore.

And if you’re buying or refinancing in 2025, you can’t afford to ignore the politics behind the policies. If you've been asking "When will rates drop?" or wondering if it's safe to start homebuying in Austin, now's the time to pay attention.

In this kind of environment, working with a mortgage broker matters more than ever. At LendFriend, we stay plugged into both the market and the policy shifts that drive it. Our job is to shop dozens of lenders, analyze rate trends in real time, and help you lock in a mortgage that works for your goals—not the Fed’s agenda.

Whether you’re exploring your first home, a second home, investment property, or just want a better deal than your current lender is offering, we’re here to help you navigate with clarity and confidence.

Want to learn more? Give us a call at 512.881.5099 or get in touch with me by completing this quick form, and I'll reach out as soon as possible.