Mortgage Rates Remain Stubbornly High—And the Fed Isn’t in a Rush to Cut

"Mortgage rates aren’t going anywhere." That was the underlying message from Federal Reserve Chair Jerome Powell during his latest Monetary Policy Report to Congress. For homebuyers, sellers, and real estate professionals—especially in high-cost markets like the San Francisco Bay Area—this signals that the affordability crunch isn’t easing anytime soon.

Speaking before the Senate Banking Committee, Powell made it clear: the Federal Reserve isn’t rushing to lower rates, and even when cuts do come, the housing market’s biggest hurdles—tight inventory, high insurance costs, and affordability concerns—won’t disappear overnight.

Mortgage Rates & Housing Affordability Under Scrutiny

Senators from both sides of the aisle pressed Powell on key issues affecting American homeownership, including mortgage affordability, housing supply constraints, and the growing insurance crisis. While Powell offered clarification on why mortgage rates remain elevated, a recent Oval Office clip featuring Elon Musk may have done a better job of simplifying the root cause of today’s affordability crisis.

Powell’s Insights on Housing & Mortgage Rates

During his testimony, Powell fielded numerous questions on homeownership challenges, highlighting two fundamental points:

The Federal Reserve does not directly control long-term interest rates. While the Fed influences short-term rates, long-term borrowing costs—including mortgage rates—are shaped by broader market expectations, federal deficits, and global economic conditions.

The Fed does not dictate housing supply. Local zoning laws, construction costs, labor shortages, and regulatory policies are the primary forces driving inventory shortages and home price appreciation.

For the Bay Area, where supply constraints are severe and median home prices hover well above national averages, Powell’s remarks reinforce what industry professionals already know—lower mortgage rates alone won’t solve the region’s affordability crisis.

Powell & Musk on the Real Drivers of High Mortgage Rates

One of the more pointed exchanges came from Senator John Kennedy, who questioned Powell on why long-term rates remain stubbornly high despite the Fed’s policy decisions. Powell acknowledged that while the Fed influences short-term rates, long-term rates—such as those tied to 30-year mortgages—are largely dictated by external factors, including the $2 trillion federal budget deficit.

Senator Kennedy: "You and the Federal Reserve can, to a large extent, control short rates... but you can’t control long rates, though, can you?"

Powell: "No, we can’t."

Powell went on to explain that long-term rates are shaped by market sentiment, inflation expectations, and broader economic risks—including the deficit’s impact on investor confidence.

Cue Elon Musk. In a recent Oval Office clip, Musk underscored how excessive government spending contributes to inflationary pressures and, in turn, higher mortgage rates. His take: America’s affordability crisis is as much a fiscal policy issue as it is a monetary one.

Key Takeaways from Powell’s Testimony

Beyond mortgage rates, Powell’s testimony highlighted several major concerns shaping today’s housing market:

Mortgage Affordability & First-Time Buyers: Senators voiced concern over how high rates are locking out first-time homebuyers, particularly in expensive markets like the Bay Area. Powell reiterated that mortgage rates are primarily tied to bond yields, not directly to Fed policy.

Federal Deficit & Interest Rates: The conversation repeatedly returned to how deficit spending influences long-term borrowing costs, keeping mortgage rates elevated.

Fannie Mae & Freddie Mac’s Role: Senator Jack Reed emphasized their importance in mortgage accessibility. Powell acknowledged their influence but deferred broader policy decisions to Congress.

Rising Home Insurance Costs: Senator Tina Smith raised concerns over how climate-related disasters are pushing insurance premiums higher, making homeownership even less attainable—an issue particularly relevant to California.

Housing Supply & Structural Challenges: Senators, including Ruben Gallego, highlighted how supply constraints—such as restrictive zoning, labor shortages, and high material costs—continue to drive prices up, regardless of interest rate policy.

The Bay Area Perspective

For San Francisco Bay Area buyers and sellers, Powell’s testimony confirms what many in the industry have already adjusted to: elevated mortgage rates are here to stay for the foreseeable future. Even if the Fed begins cutting rates later this year, broader affordability challenges—low housing supply, regulatory hurdles, and rising insurance costs—will continue shaping the market.

For now, strategic buyers will need to focus on creative financing solutions, while sellers should remain realistic about pricing in a high-rate environment. The market isn’t standing still—but it isn’t returning to ultra-low rates anytime soon, either.