How will mortgage rates respond to more turmoil at the Fed?

Mortgage rates had been moving lower lately, but no one was sure how the financial markets would digest macroeconomic news and an escalating battle at the Federal Reserve. Turns out, rates today are touching the lows we saw last week of 6.52%, according to Mortgage News Daily.

“Mortgage rates fell slightly today as mortgage spreads were good once again,” said HousingWire Lead Analyst Logan Mohtashami. “The 10-year yield rose last night after the Fed news but gave up that entire move.”

Trouble at the Fed

This was unexpected after Monday’s news that President Donald Trump followed through with threats to fire Fed Governor Lisa Cook, who is facing accusations of mortgage fraud. Although Cook hasn’t been charged by the Department of Justice, the administration has been outspoken in its desire to remove Cook for what it believes is a justifiable reason.

“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve,” Trump wrote recently on Truth Social. “In light of (Cook’s) deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”

Cook defended herself in a statement released Monday night and said she would not resign. She also received support from Rep. Maxine Waters (D-Calif.), a key lawmaker in the housing sector who has been critical of Trump’s attempts to consolidate power at the Fed and other institutions.

“Let me be crystal clear: removing Dr. Cook from the Board without legitimate cause is unconstitutional, and I am confident it will not stand in court,” Waters said in a statement. “… Make no mistake, Committee Democrats will fight this illegal attempt to fire Dr. Lisa Cook with everything we have. We will not allow Trump or any of his allies to hijack our institutions for their authoritarian ends.”

The attempted removal of Cook follows other recent turmoil at the central bank. Earlier this month, Adriana Kugler announced her resignation from the Fed’s board. Kugler’s term was set to expire in January 2026 and the vacancy is expected to be filled in the short term by a Trump ally.

Kugler was appointed by former President Joe Biden and had been supportive of Fed Chair’s Jerome Powell’s “wait-and-see” stance on monetary policy, although she was absent from the Fed’s July 30 meeting and did not vote.

Powell, whose term ends in May 2026, has faced his own well-documented battles with Trump, but the president hasn’t tried to remove him. The Supreme Court has indicated that Fed officials cannot be removed without cause, meaning that Cook’s case is likely to be settled by the high court.

“The Supreme Court needs to make it clear that the bar for removal is very high and that the president cannot selectively target anyone who gets in the way of his designs to control the Fed,” Jason Furman, a former chairman of the White House Council of Economic Advisers, wrote in an op-ed published Tuesday by The New York Times.

How will the battle play out for housing?

The mortgage rate environment has been more hospitable of late. Data at HousingWire’s Mortgage Rates Center on Tuesday, which tracks locked loans, showed that the average 30-year conforming loan rate was 6.74%. That figure was unchanged from a week ago, although it’s down significantly after topping 7% in mid-June. The Mortgage News Daily shows the average 30-year fixed rate was 6.52% on Tuesday, matching year-to-date-lows of last week.

Still, analysts like HousingWire’s Logan Mohtashami think that rates will need to drop closer to 6% before housing supply and demand accelerates in a meaningful way. Mortgage lenders and interest rate traders appear to be pricing in lower rates now as they anticipate a Fed rate cut in September.

At last week’s Jackson Hole Economic Symposium, Powell stopped short of committing to a rate cut next month while acknowledging a slowdown in the labor market that is likely to push the Fed in that direction.

Aaron Terrazas, an economist for home equity investment company Point, said in written commentary that a September rate cut could thaw “some of the chill that froze much of the housing market over the summer.” But he cautioned that other factors are likely to keep potential homebuyers at bay.

“Point’s research shows more than half of homeowners are worried about making student loan payments in the aftermath of the One Big Beautiful Bill — even as they sit on record levels of home equity,” Terrazas wrote.

“Interest rates may be a few basis points lower than before Powell’s speech, but the reality is that student loan borrowers are going to end up paying more of their education debt for longer moving forward — and the potential savings from eliminating that debt as soon as borrowers can remain enormous.”

Mortgage application activity has bounced around for much of 2025. Data from the Mortgage Bankers Association (MBA) shows healthier trends for purchase applications compared to 2024 — including 29 straight weeks of annualized growth and 16 straight weeks of double-digit growth.

Last week, total applications (including refinances) declined by 1.4%, driven by a pullback in the U.S. Department of Veterans Affairs (VA) loan segment.

“Higher mortgage rates led to a decrease in mortgage applications last week, particularly refinances,” Bob Broeksmit, MBA’s president and CEO, said in a statement. “However, while purchase applications were also down, they were still at their strongest pace in four weeks. Housing affordability remains a challenge for many prospective homebuyers, but demand continues to be stronger than last year.”

Samir Dedhia, CEO of One Real Mortgage, was more bullish on the mortgage climate as rates have slowly come down.

“This current rate environment gives consumers more power both in terms of affordability and negotiating flexibility,” Dedhia said in a statement. “For buyers, lower rates mean increased purchasing power. For homeowners, it could be the right time to explore refinancing options. And whether you’re buying or refinancing, getting quotes from more than one lender remains one of the smartest moves to ensure you’re getting the best deal possible.”