Conflicting Fed views keep mortgage pros planning for higher rates for longer
Citigroup’s latest call on Federal Reserve policy pushed hoped‑for rate relief further out of reach for borrowers and forced mortgage professionals to rethink how long “higher for longer” might last.
In an April 3 note, the Wall Street bank said it now expects three 25‑basis‑point cuts in September, October and December, rather than June, July and September.
“We continue to think signs of a weakening labor market will result in cuts later in the year. But the timing of upcoming data suggests a later start to rate cuts than we had previously been expecting,” Citigroup said.
The shift followed stronger‑than‑expected US jobs data. March payrolls added 178,000 positions, while the unemployment rate ticked down from 4.4% to 4.3%, the Bureau of Labor Statistics (BLS) said.
Citigroup still projected a total of 75 basis points of easing this year, arguing that signs of a weakening labor market would eventually emerge and push unemployment higher over the summer.
That deterioration, it said, would create the conditions for the Fed to begin cutting from the current 3.50%–3.75% target range after its April 7–8 meeting, where markets broadly expect no change.
Wells Fargo, on the other hand, struck a more hawkish tone.
The Wells Fargo Investment Institute said it no longer expect the Fed to cut rates in 2026, pointing to “a noticeable but likely transient inflation bump and elevated uncertainty” tied to the war in Iran.
“We believe that the balance of risks has shifted to incentivize patience from the Fed,” Wells Fargo strategists said.
Mortgage specialists have already been warning that even a series of Fed cuts might only nudge mortgage rates modestly lower.
In an interview with Mortgage Professional America, the Mortgage Bankers Association’s chief economist said rates are likely to hover in the 6%–6.5% range in 2026.
Meanwhile, other analysts told MPA that borrowers should expect only “slight easing” rather than a return to pandemic‑era lows.
Brokers in a separate MPA roundtable said they do not “need rates to fall out of the sky” to do business, but stressed that clearer guidance from the Fed is critical for pipeline planning and borrower expectations.
Freddie Mac reported its benchmark 30‑year fixed‑rate mortgage averaged 6.46% as of April 2. That's up from 6.38% a week earlier and 6.64% a year ago.
The 15‑year fixed rate also edged higher, averaging 5.77% compared with 5.75% last week and 5.82% at this time in 2025.
The latest move kept long‑term borrowing costs above 6% for the fifth straight week, reversing a brief dip below that level in late February that stirred hopes of more durable relief for rate‑sensitive borrowers.
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