Let me say this loud and clear: this is not a political piece. I’m not here to take sides or tell you who to vote for—I’m here to break down what could actually happen in real estate if interest rates fell to 1%, like Trump has been publicly pushing for. Whether that ever happens or not, it’s worth understanding what that kind of shift could mean for you as a buyer, seller, or investor.
The Drama: Trump vs. Powell
Over the last few months, Trump has made it very clear: he wants interest rates way lower—like 1% or even less. And he’s been going after Fed Chair Jerome Powell hard, saying the current high rates are slowing the economy and crushing growth.
Meanwhile, Powell’s not budging. He’s focused on keeping inflation under control and says he’s not cutting rates just because there’s political pressure. That’s led to some wild headlines, market swings, and speculation about what could happen if Trump were to win and try to shake things up at the Fed.
But let’s set the political stuff aside for a minute.
What would actually happen if the Fed dropped the benchmark rate to 1%?
First—How Fed Rates Connect to Mortgages
Quick breakdown for those not deep in finance: The Federal Reserve sets the federal funds rate, which is what banks charge each other to borrow money overnight. That rate doesn’t directly control mortgage rates, but it heavily influences them.
Here’s how it works:
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When the Fed cuts rates, banks can borrow money cheaper, which leads to lower interest rates across the board—on credit cards, HELOCs, and yes, mortgages.
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Mortgage lenders look at the 10-year Treasury yield to help set their rates, and those yields often drop when the Fed signals cuts.
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So if the Fed dropped its rate to 1%, it’s likely mortgage rates could fall back into the 3% to 4% range (compared to 6–7% right now).
What That Would Mean for Buyers
Let’s run a quick example:
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On a $400,000 home with a 6.5% mortgage rate, your monthly payment (principal and interest) is about $2,528.
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At a 3.5% rate? That drops to $1,796.
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That’s a $700+ monthly difference. Game changer.
A move like that would flood the market with buyers. First-timers who’ve been sidelined by high rates would jump back in. Investors would come off the sidelines. Refinancing would boom.
In short, real estate would go nuts.
What It Could Do to Home Prices
Remember what happened in 2020 and 2021 when rates were historically low? Home prices skyrocketed. Demand went up, inventory stayed low, and buyers were battling it out with multiple offers.
If we go back to 1% rates, we could see that kind of surge again—10% to 15% appreciation in many markets, and probably higher in hot spots like Utah, Arizona, and Florida.
But here’s the kicker: inventory is already tight because so many people are locked into 2–3% rates. If demand spikes and supply stays low, expect more bidding wars and fast-moving deals.
Investors Would Flock In
With mortgage money cheap and stock market volatility up, investors would look at real estate as the safest bet. We’d likely see more competition from big buyers, cash-rich investors, and Airbnb-type plays in popular areas.
This could be a great opportunity or a pricing pressure, depending on where you are.
Risk of Overheating? Definitely
Here’s the downside. When rates are too low for too long, it can create bubbles. That’s what happened before the 2008 crash. If prices spike too fast, affordability tanks, and when rates eventually rise again, people can get stuck.
And let’s not forget inflation. If borrowing gets too easy, spending ramps up, and inflation could start heating up all over again. That would force the Fed to pump the brakes hard, and suddenly, we’re back to high rates—just like we saw post-pandemic.
So... Is 1% a Good Thing?
There’s no easy answer.
If you’re buying, refinancing, or investing in the short term—1% Fed rates would likely create incredible opportunities. Lower payments, more leverage, and fast appreciation.
If you’re worried about long-term stability—you might want to be cautious. Rapid price growth and investor demand can crowd out regular buyers. And if inflation spikes again, we could see another sharp reversal.
Bottom Line
Whether or not 1% ever happens, this is a reminder of just how powerful the Fed is when it comes to real estate. Mortgage rates, home prices, inventory, investor appetite—it’s all connected.
And if you're trying to time your next move, now’s the time to be watching closely.
