New Fed Chair Kevin Warsh and Rental Loan Rates in 2026

Kevin Warsh became the new Federal Reserve chair today, replacing Jerome Powell. If you're a real estate investor who's been watching interest rates and waiting for a better moment to buy or refinance a rental property, you probably have one question: does this change my math?

The short answer is maybe, but probably not the way you're expecting, and probably not right away. Here's what's actually going on and what to do with it.

What the new Fed chair means for rental loan rates

The Fed controls the federal funds rate, the short-term rate you hear about every time there's a Fed meeting. Warsh has signaled he wants to cut that rate. That's what's getting all the attention.

But the rate on a DSCR rental loan doesn't follow the federal funds rate. It follows the 5-year Treasury. These are two different numbers, and they don't always move together. Think of it this way: the Fed controls a dial that affects overnight lending between banks. Your rental loan is priced off a completely different dial, set by the bond market based on what investors expect from the economy over the next five years. Warsh can turn his dial, and the other one might not move.

The connection between what the Fed announces and what shows up on your loan rate is indirect — and sometimes the two go in opposite directions. We covered exactly this in our post on how Fed moves actually flow through to investor loans, and the same logic applies here.

There's a recent example worth knowing. In 2024, the Fed cut rates by a full percentage point across three separate meetings. DSCR rates barely moved. The 5-year Treasury actually ended 2024 higher than it started. Investors who held off on rental acquisitions expecting a meaningful drop got very little for the wait. Warsh may deliver a different outcome, but 2024 is a useful reminder that "the Fed is cutting" and "your rental loan is getting cheaper" are not the same sentence.

What Warsh is actually planning

Warsh is coming in with an unusual strategy. He wants to cut the short-term rate while also selling off a large chunk of the bonds the Fed accumulated during the pandemic, particularly mortgage bonds.

Here's the catch. When the Fed sells bonds, it puts upward pressure on bond yields, including the 5-year Treasury. So his two moves work against each other from a DSCR borrower's perspective. The rate cut might help short-term borrowing costs, but the bond selling keeps the 5-year elevated — which means your rental loan rate doesn't fall as much as the headlines suggest.

This approach has never been tried before. Three of the twelve members of the rate-setting committee already dissented at the last meeting, which tells you the Fed itself isn't aligned on it. There's real uncertainty about where this leads.

A Warsh rate cut announcement doesn't automatically translate into a lower DSCR rate. It might. It might not. And you can't run your real estate business on might.

What would actually move rental rates lower

Since the 5-year Treasury is the number that matters for your rental loan, that's what to watch. You can track it any time at Treasury.gov. As of this morning, the 5-year is sitting at 4.253% — a useful baseline to compare future moves against.

A weaker labor market or a string of lower inflation readings would push the 5-year down. What keeps it elevated is inflation that stays sticky, or a bond market that stays skeptical about the long-term picture. Fed rate cut announcements feed into that picture, but they're not the whole story.

What rental investors should do now

DSCR rates at Pimlico are starting at 6.125%. If you've been sitting on the sidelines waiting for a better number before pulling the trigger on a refinance or an acquisition, ask yourself one question first: does the deal work at 6.125%?

If it does, if the rent covers the payment and the cash-on-cash return makes sense, then waiting on a rate prediction is costing you real cash flow right now. The cost of waiting isn't zero. It shows up as months of rent you didn't collect and deals you didn't close. Whether your deal pencils at today's rates is the question to answer before anything else. And for context on where rates stood heading into 2026 before Warsh took over, that post covers the baseline.

If the deal doesn't work at today's rate, then you're not really waiting on Warsh. You're waiting on a better deal. That's a separate problem, and the Fed isn't going to solve it for you.

For investors currently in a bridge loan and thinking about their exit: bridge rates track short-term borrowing costs more directly than DSCR rates do, so a Fed cut is more likely to move bridge rates in a meaningful way. Pimlico's bridge rates start at 9.95% right now. As you're thinking through your bridge loan exit strategy, a rate cut environment could improve your refinance options on the back end. But get a locked rate in hand before you count on it.

Run your numbers at current rates. If the deal works, close it. Anything Warsh delivers later is upside.

Frequently asked questions

Does a Fed rate cut lower my rental loan rate?

Not directly. DSCR rental loans price off the 5-year Treasury, not the federal funds rate that the Fed controls. A Fed cut can eventually put downward pressure on the 5-year, but the two numbers move independently and can go in opposite directions.

What's the difference between bridge and DSCR rates when the Fed cuts?

Bridge loan rates track short-term borrowing costs more directly, so a Fed cut has a faster and more predictable effect on bridge borrowers. DSCR rates follow the 5-year Treasury, which the bond market sets independently. Same Fed announcement, different impact depending on which product you're in.

Should I wait to refinance my rental until Warsh cuts rates?

That depends on whether your deal works today. If the rent covers the payment at current rates, waiting costs you real cash flow in exchange for a rate that may not arrive on the timeline you're expecting. If the deal doesn't work at today's rate, that's a deal problem, not a rate problem.

Will DSCR rates drop in 2026?

Possibly, but not guaranteed. Warsh's plan to sell mortgage bonds could keep upward pressure on the 5-year Treasury even as he cuts short-term rates. Watch the 5-year Treasury, not the Fed funds announcements.