We have a new captain in the left seat at the Federal Reserve and the flight plan looks nothing like what most of us filed at the start of the year. Back in January, I laid out the case for rates gradually drifting lower through 2026 as the Fed worked through its cutting cycle. For a while, that forecast held. Then the crew changed, the geopolitical weather turned, and the whole approach was amended. If you've been waiting on the sidelines for rates to keep sliding, this is the update you need to read before you make your next move.
Let's break down what changed, where we stand as we start the second half of the year, and how to fly through the back half of 2026.
1. The Regime Change: Powell Out, Warsh In
The biggest story in the mortgage world this year isn't a number, it's a name. On May 22, Kevin Warsh was sworn in as the new chair of the Federal Reserve, succeeding Jerome Powell after an eight-year run and one of the most contentious confirmation fights in Fed history. The Senate vote was 54-45, almost entirely along party lines.
Warsh isn't new to the building; he served as a Fed governor from 2006 to 2011, right through the financial crisis. Since then, he's built a reputation as a consistent critic of easy monetary policy. He been arguing for a leaner Fed, tighter inflation discipline, and less market handholding. In pilot terms: the new captain flies a more conservative profile than the last one.
And here's the twist nobody saw coming: Powell didn't leave. In a break with nearly 80 years of tradition, he's staying on the Board as a governor, which means the former chair still holds a vote on the very committee his successor now runs. That's an unusual dynamic, and markets are still figuring out what it means for policy.
2. Up to Now in 2026
Here's the snapshot as we sit in mid-July:
30-year conventional fixed rates are averaging around 6.49% per Freddie Mac's latest weekly survey, with daily indices running in the 6.5 to 6.65% range. That's up from the low 6.4s just a month ago, but for perspective, we're still below the 6.72% we saw this time last year.
VA rate national averages are running roughly 5.9 to 6.35% on a 30-year fixed, with some lenders quoting well-qualified veterans in the high-5s even amid the volatility. That quarter-to-half-point spread below conventional is the government guarantee doing its job.
The 10-year Treasury has climbed to roughly 4.6% which is its highest level in about two months. That's a meaningful backup from the low-4s we enjoyed earlier in the cycle.
The Fed funds rate sits at 3.50 to 3.75%, where it's been parked for months after the cuts of late 2025.
Core inflation is the problem child: core personal consumption expenditure (PCE) is running around 3.4%, well above the Fed's 2% target and moving in the wrong direction.
3. Why the Script Flipped
Two forces collided this spring and summer:
First, the conflict with Iran. Renewed hostilities and disruptions in the Strait of Hormuz sent oil prices sharply higher, and energy costs feed straight into inflation expectations. Bond traders don't wait for the consumer price index print. They price the fear immediately, and Treasury yields climbed accordingly. When yields climb, mortgage rates follow. Same physics as always.
Second, the Fed's posture hardened. At Warsh's first meeting as chair in June, the committee held rates steady but the tone shifted decisively hawkish. The updated projections showed a majority of policymakers now believe the next move may need to be a rate hike, not a cut. At the start of the year, markets were debating how many cuts we'd get in 2026. Now futures markets are pricing meaningful odds of a hike as early as September.
That is a complete reversal of the easing story and it's the reason the “just wait for lower rates” strategy has gotten a lot riskier.
4. The Irony of the Warsh Appointment
Here's the part worth appreciating: the administration nominated Warsh with the explicit expectation of faster rate cuts. What it got (at least so far) is a chair inheriting an inflation problem that ties his hands. Warsh built his career on inflation-fighting credibility, and with core PCE at 3.4% and oil surging, cutting rates now would torch that credibility on day one. Whatever the political pressure, the math is the math. Until inflation turns back toward 2%, this Fed has little room to ease and the bond market knows it.
5. Forecast for the Rest of 2026
Here's the educated case for the back half of the year:
10-year yields: With inflation sticky and a possible hike on the table, expect the 10-year to hold in the 4.4 to 4.7% band through Q3. A durable ceasefire in the Middle East or a string of soft inflation prints could pull it back toward 4.2%; another oil shock could push it toward 5%.
Mortgage rates: Housing economists broadly expect the 30-year fixed to stay above 6% for the remainder of the year. Realistically, we're looking at a 6.4 to 6.8% trading range through fall, with the mid-6.3s achievable only if volatility calms and inflation cooperates.
VA rates should continue tracking a quarter to half point below conventional, as usual.
The wildcards are: the Fed meetings, the monthly CPI and jobs reports, and every headline out of the Strait of Hormuz. This is a headline-driven market, and headline-driven markets move fast in both directions.
6. The Breakdown and (Realistic) Prediction
| Item | Mid-July 2026 | End of 2026 (Forecast) |
| Fed funds rate | 3.50–3.75% | Steady, with hike risk |
| 10-yr. Treasury | ~4.6% | 4.3–4.8% |
| 30-yr. mortgage | ~6.5% | 6.3–6.8% |
| VA loan | ~6.0–6.3% | High-5s to mid-6s |
7. What Should Be Done Now
The era of “rates will definitely be lower in six months” is not as common, at least for now. Here's how I'd play it:
If you're buying: Stop trying to time the Fed. Home prices hit an all-time high in June. The median existing home crossed $440,000 and inventory remains tight. Waiting for a rate that may never come while prices keep grinding higher is a losing trade. Buy when the house and the payment work for your life, and structure the loan so you can refinance if rates ever do break lower. This is cliché but it holds steady: marry the house, date the rate.
If you're holding a rate above 7% (conventional) or above 6.5% (VA): The refi math still works today. Don't wait for perfection, a half-point improvement you can lock now beats a full point you might never see if you plan on staying where you are for the foreseeable future.
If you locked in 2021: Congratulations, you're flying with a tailwind nobody can match. Stay put, and if you need cash, look at a second lien or home equity line of credit (HELOC) before you ever touch that first mortgage.
If you're a veteran: Your VA benefit is the best hedge in this environment. Lower rates than conventional, zero down, and Interest Rate Reduction Refinance Loan (IRRRL) streamline options if the market ever turns. If you haven't had your entitlement picture reviewed recently, now is the time.
The new Fed era is going to be defined by discipline, not stimulus. Plan your flight accordingly, and team up with a lender who reads the instruments instead of the headlines.
Trident Home Loans (Equal Housing Lender, NMLS 65716) keeps leading the pack for aviators nailing down the perfect mortgage. Drop a line to Spencer Wartman (NMLS 2109932) at [email protected]. He's your guy for turning forecasts into keys in hand. Got a hot topic for the next roundup? Hit him up directly.
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