Industry leaders reveal why economic, geopolitical chaos may not move the market as much as you think
The first half of 2025 has seen a series of macroeconomic events that have continued to challenge day-to-day affordability. Interest rates have remained high, and the threat of additional tariffs has the Federal Reserve ready to hold rates once again next week.
Amid economic challenges, geopolitical conflicts in the Middle East and Eastern Europe have added additional strain to global markets. Two mortgage industry veterans believe the market may be reaching the point of being desensitized to the daily news barrage.
Emmanuel St. Germain (pictured top left), CEO, and Jared Perlman (pictured top right), COO of Choice Mortgage Group, are waiting to see what happens with the ongoing drama with the Fed, like so many others in the industry.
“I think where they're headed really depends on, in all honesty, how long Jerome Powell stays in office,” Perlman told Mortgage Professional America. “I think you have two very diametrically opposed views. And I do think if Powell leaves early, and you have Scott Bessent or somebody else who's in the current administration come in, I think you're going to see a one-time larger rate cut.
“It will be three-eighths to a half of a percent to be aligned with the current administration, whether or not it actually makes fiscal sense.”
Unprecedented lack of market reaction
St. Germain said he has never seen the market so resistant to the type of chaos we’ve seen over the first few months of the year. Because of this, he’s not sure that rate decisions made by the Federal Reserve are going to make a huge difference.
“I think that it doesn't really matter what the Fed does,” St. Germain told Mortgage Professional America. “In my 20-year career, I've never seen a 10-year Treasury that's held steady like this. When you have bombs being dropped in the Middle East and nothing happens on Monday morning, the 10-year stayed steady. That's not normal. I think we've become really desensitized as a market.”
He also noted the conflicting jobs reports that came out on back-to-back days, and how they had a limited impact on mortgage rates.
“What you hear on Main Street doesn't show up in the jobs report,” St. Germain said. “Somehow, all of a sudden, we had a huge difference between the ADP report and the jobs report that came out. Those are huge numbers. And everything that I keep hearing about the Fed is that they're very reactive. They're never proactive. Everything that they're doing is they keep waiting on employment to break.
“Every time you think employment is about to break, and we're going to get some bad numbers, a report comes out, and it's the complete reverse, and you have opposing data like that. It's really hard for a market to understand and to go along with where they're going.”
St. Germain believes that one of the biggest issues in the housing market is that everyone remembers how low rates were during the pandemic. He said the current rates, while still elevated, wouldn’t seem as bad if there hadn’t been a pandemic-induced depression in rates just five years ago.
“A really big issue regarding rates is about affordability,” he said. “We have a major crisis in affordability at the moment, and a big part of it is because we were teased with these rates from COVID. If we never had rates in the twos and low threes, you wouldn't have had that to compare it to. I don't remember anything (before COVID) below 4.5%. You know, 5%, 6% is a normal rate in the lending world.”
Fed action may not matter
Perlman said there are more factors impacting mortgage rates, and he thinks that, short of a major rate cut by the Fed, it may not matter what the central bank does in the short term.
“I really don't think it makes a world of difference,” Perlman said. “Obviously, a big half percent rate cut is going to do something in the short term, but I think we'll see a bounce back. I do think you see a slow trickle down into the fives at some point over the next few years.”
There are still questions about whether the Trump administration will attempt to replace Jerome Powell early. Scott Bessent, Secretary of the Treasury, is one of the names that have been thrown around as a possible Powell replacement. Most believe he would try to come in and cut rates. However, Perlman said that other market factors may have a greater impact on future rates.
Speculation about Federal Reserve Chair Jerome Powell's potential departure is sparking anticipation among mortgage professionals for a significant interest rate reduction.https://t.co/RZwKvvlzDy
— Mortgage Professional America Magazine (@MPAMagazineUS) July 24, 2025
“I don't think there is one solution to it, whether it's Powell or whether it's Bessent or whether it's somebody else controlling it,” he said. “You just have servicing values that are all out of whack. You have the secondary market paying up for certain things, paying down for other things. You have different aggregation strategies in play.
“Then you have a spread between the 2-year and the 10-year. Parts of servicing values are just really a big part of it. I think a lot of people don't talk about it. It's not something that your day-to-day loan originator or your client is really thinking of, but I think we're here in this market, at least for the foreseeable future.”
St. Germain said the sooner people realize that pandemic-era rates are not returning anytime soon, the faster the housing market can recover.
“It is so much more expensive to borrow today because we're also comparing it to COVID,” St. Germain said. “I don't think that market and those rates are coming back. And I think the faster we get adjusted to what life is like, the better the consumer will be.”
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