The Federal Reserve under new Chairman Kevin Warsh is in no rush to lower interest rates, but a multiyear effort by President Donald Trump's administration might have the effect of pushing down mortgage rates for many Americans anyway.
Last week, Trump downplayed a bipartisan affordable housing bill that he delayed signing, arguing that its importance paled in comparison to that of interest rates.
Speaker of the House Mike Johnson said the House of Representatives would likely send the bill to Trump's desk on Monday, starting a 10-day clock for Trump to approve or veto the legislation before it becomes law without his signature. The bill, called the 21st Century Road to Housing Act, would likely have only a modest impact on home affordability.
A much more impactful effort -- dubbed Basel III Endgame -- could finally reach a head in the coming months. The proposed rule, which would lower capital requirements for many banks, would likely have the side effect of lowering mortgage rates for many Americans.
Regulators have been working on finalizing new capital standards for banks for years, the culmination of an international effort to harmonize capital requirements after the 2008 financial crisis. Regulators under President Joe Biden came up with rules that would have increased requirements, but they came under heavy criticism and regulators issued a new, heavily revised proposal. The new rule's comment period ended earlier this month.
The proposal could have the effect of lowering the cost of 30-year fixed-rate mortgages by up to 0.2 percentage point and by up to a half percentage point for borrowers who make a down payment of at least 40%, according to a paper by the Urban Institute, a Washington-based think tank.
Higher-risk borrowers who put less than 20% down could see their rates increase modestly, the researchers wrote. Borrowers who make a 20% down payment, often the minimum amount to avoid having to pay for private mortgage insurance, might see rates drop between 0.15 percentage point and 0.4 percentage point.
Of course, borrowers can't be certain of how banks will react to the new proposal until it's finalized and companies have time to digest it. Banks traditionally have not seen mortgages as a huge profit center, the Urban researchers noted, instead seeing them as a way to deepen relationships with customers who might also use their other products.
The changes should, however, make it more attractive for banks to hold lower-risk mortgages. Banks have to hold capital against mortgages they have on their balance sheets based on how risky regulators view them to be, and for low-risk loans, the proposal would substantially decrease those so-called risk weights.
It will likely take until the end of the year or early 2027 for the capital proposal to be finalized.
Write to Joe Light at joe.light@barrons.com
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(END) Dow Jones Newswires
June 29, 2026 12:59 ET (16:59 GMT)
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