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For Americans looking either to buy a home or refinance a pricey mortgage, patience is probably wearing thin. After spiking in 2022 and 2023, mortgage rates have stayed well above the rock-bottom levels of the pandemic. And they have barely budged even after the Federal Reserve trimmed its benchmark cost of borrowing in 2024 and 2025.
High mortgage rates are one reason President Donald Trump has been pressuring the Fed to cut further. But as finance professor Michael J. Highfield explains, the central bank actually has little control over the cost of home loans – and Americans may be stuck with high rates for a long time.
There are several factors in play. Markets expect inflation to stay elevated, while U.S. government debt has exploded in recent years. Both mean that it’s more expensive for investors to hold on to that debt.
In the end, mortgage rates are largely determined by “millions of investors making judgments about the future,” Highfield writes. “And at the moment, those investors remain cautious.”
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Even though the Fed cut interest rates in 2024 and 2025, mortgage rates have stayed high, frustrating many would-be homebuyers.
AP Photo/Jenny Kane
Michael J. Highfield, Mississippi College; Mississippi State University
Investors’ inflation expectations, much more than the central bank, are among the factors that affect the cost of home loans.
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