CEO agrees with President Trump that a rate cut is necessary to jumpstart the mortgage market
The Federal Reserve is expected to hold steady on interest rates when it meets on Wednesday in a wait-and-see stance that’s drawn loud criticism from President Trump, who has demanded a rate reduction – and one industry expert agrees with the president that a rate cut is needed.
George Carrillo (pictured top), co-founder and chief executive officer at the Hispanic Construction Council, is concerned that the mortgage market may continue to struggle if the Fed holds rates steady.
“A delay in Federal Reserve rate cuts can prolong existing challenges in the mortgage market,” Carrillo told Mortgage Professional America. “Higher rates keep borrowing costs elevated, which dampens homebuyer demand, particularly for first-time buyers who are already struggling with affordability.”
In addition to keeping buyers out of the market, Carrillo believes it will keep sellers from putting homes up for sale.
“Sellers might hold off listing their properties, knowing buyer demand is weak or fearing they won’t find comparable financing for their next purchase,” he said. “This creates a cycle where inventory remains tight, further exacerbating affordability issues. The market could become increasingly stagnant, with only high-income buyers able to remain competitive, further limiting accessibility to the broader public.”
Tariffs started the volatility in the market
Carrillo believes that if the ongoing tariff issue, which began in early April, continues, it could force the Fed to delay rate cuts for longer.
“The ongoing trade war and the resulting economic uncertainty could pressure the Fed to delay rate cuts even further,” Carrillo said. “Tariffs create volatility in global markets and increase production costs, which can ripple down to consumers. This complicates the Fed’s decision-making process because it deepens uncertainty, making it harder to predict the economy’s trajectory.”
In a worst-case scenario, Carrillo believes the Fed may even have to increase rates if inflation starts to spiral upwards.
“If market data doesn’t support inflation staying under control or if international tensions escalate, the Fed may feel the need to maintain or even raise rates to stabilize these external pressures,” he said. “The markets’ current bet on no cuts before July highlights this cautious sentiment.”
While Carrillo believes the Fed needs to act, he is sympathetic to its challenges in balancing economic stimulation with avoiding inflationary actions.
“Balancing rate cuts is like walking a tightrope,” he said. “The Fed needs to lower rates enough to stimulate activity in the housing market without triggering higher inflation that makes everyday goods and household costs rise. Cutting rates too aggressively could drive up demand too quickly, further inflating home prices in a supply-constrained market.”
“It’s likely the Fed will aim for a gradual approach, lowering rates in small increments to gauge the market’s response.”
Carrillo notes that a rate cut combined with policy measures to help housing affordability could maximize the benefit of the rate change.
“The key challenge is ensuring these cuts improve affordability for buyers while keeping overall price stability in check,” he said. “Public policy measures, like targeted investments in affordable housing, could complement rate cuts to make a more meaningful impact without fueling excess inflation.”
External factors may also play a role
The mortgage market could be set for even more trouble ahead if the Fed decides to hold off on rate cuts, according to Carrillo.
“If we don’t see any Fed action until July or later, the mortgage market might find itself in a more constrained position than it is now,” he said. “Even as rates remain high, the demand for housing could continue to outstrip supply, especially if no meaningful policies or financial incentives are introduced to address inventory concerns.”
If demand surges without an increase in supply, house prices may jump considerably, which would make affordability an even greater headwind.
Bob Driscoll of Rockland Trust sees mortgage buyers grappling with frustration as the market remains volatile, with high rates and affordability challenges. https://t.co/voaT51ZdUA
— Mortgage Professional America Magazine (@MPAMagazineUS) May 2, 2025
“Buyers who have been holding out for rate reductions could flood the market, creating a sudden spike in competition without addressing the core issue of supply,” Carrillo said. “This could push prices even higher, ironically worsening affordability. Meanwhile, homebuilders may remain hesitant to ramp up new construction due to economic uncertainty, leaving inventory at a standstill.”
Carrillo notes a possible wildcard in all the rate talk. If tariffs continue on China, it may decide to sell off its stockpile of mortgage-backed securities (MBS), which could also raise rates.
“If China were to sell off significant holdings of mortgage-backed securities in response to geopolitical tensions, it could drive up mortgage rates independently of the Fed’s actions,” he said. “This would put the central bank in a difficult position, as it might need to implement unscheduled interventions to stabilize the market.”
This also doesn’t account for other external factors, which can swing the market dramatically in a short period of time – and the executive said the Fed must remain on its toes to be ready to act if these external pressures build up.
“Unexpected events like natural disasters, global economic downturns, or shifts in consumer sentiment could alter the housing market’s trajectory, forcing the Fed to adapt its strategy quickly,” Carrillo noted. “These factors highlight the importance of staying vigilant and flexible in policymaking while preparing for unanticipated disruptions.”
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