Other banking giants pushed out rate‑cut bets, keeping mortgage relief distant
Wall Street’s biggest forecasters have nudged the prospect of cheaper money even further into the distance, leaving mortgage lenders and borrowers facing a higher for longer backdrop well into 2026.
J.P. Morgan withdrew its call for a January 2026 rate cut and instead projected that the United States Federal Reserve’s next move would be a 25‑basis‑point hike in the third quarter of 2027, implying no easing at all next year.
Barclays, Goldman Sachs and Morgan Stanley also pushed their rate‑cut timelines back toward mid‑2026, reflecting data that shows a cooling but still resilient labor market.
“If the labor market weakens again in the coming months, or if inflation falls materially, the Fed could still ease later this year,” J.P. Morgan said in a client note.
“However, we expect the labor market to tighten by the second quarter and the disinflation process to be quite gradual.”
Goldman Sachs, which has previously expected cuts in March and June, now anticipates two 25‑basis‑point reductions in June and September 2026, and sees the fed funds rate ending 2026 at 3–3.25%.
“If the labor market stabilizes as we expect, the FOMC will likely shift from risk management mode to normalization mode,” Goldman said, cutting its 12‑month US recession probability to 20% from 30%.
Meanwhile, market pricing implied about a 95% chance that policymakers would leave rates unchanged at their January meeting, up from 86% before the latest jobs data, according to the CME FedWatch tool.
The shift in expectations arrive after a bruising stretch for housing demand, marked by elevated mortgage rates and affordability strains.
Analysts generally expected 30‑year fixed mortgage rates to remain in the low‑ to mid‑6% range through late 2025, easing only gradually into 2026 and 2027.
After two years of aggressive Federal Reserve tightening and a sharp run‑up in Treasury yields, Bankrate projects that the average 30‑year fixed mortgage rate would sit near 6.1% in 2026. That's down modestly from late 2025 but well above the sub‑3% levels that fueled the pandemic refi wave.
Brokers have leaned on localized advice and face‑to‑face service to compete in a slow market, even as borrowers confront much higher rates than four or five years earlier. Some originators reported that modest rate dips still managed to unlock pockets of pent‑up demand, suggesting sensitivity to even small moves lower.
The rate debate also unfolded against renewed concerns about Fed independence, following reports of tensions between president Donald Trump and Fed chair Jerome Powell over the pace of easing.
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