Mortgage Rates: Trump’s Election Win Casts Uncertainty
The Outlook for Mortgage Rates
Donald Trump’s election win is clouding the outlook for mortgage rates even before he gets back to the White House. The president-elect campaigned on a promise to make homeownership more affordable by lowering mortgage rates through policies aimed at knocking out inflation. However, his proposed economic agenda could potentially set the stage for mortgage rates to move higher, some economists and analysts say.
Bond Yields and Mortgage Rates
Mortgage rates are influenced by several factors, including moves in the yield for U.S. 10-year Treasury bonds, which lenders use as a guide to price home loans. Treasury yields rose in recent weeks even after the Federal Reserve cut its benchmark interest rate, which influences rates on all types of loans including mortgages. Investors appeared to question how far the Fed should cut rates given the strength of the economy.
Expectations of Higher Rates
Then yields surged further immediately after Trump’s victory, sending the average rate on a 30-year mortgage up to 6.79%, according to mortgage buyer Freddie Mac. "Given what we’re seeing in bond markets, investors are expecting higher rates under a Trump administration and are starting to position in that direction already," said Danielle Hale, chief economist at Realtor.com. "So, if overall rates are higher, that would tend to also mean that mortgage rates would move higher, too."
Impact on Homebuyers
Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, reducing their purchasing power at a time when home prices remain near record highs despite a housing market sales slump dating back to 2022. Elevated mortgage rates and high prices have kept homeownership out of reach for many first-time buyers. They accounted for just 24% of all homes purchased between July 2023 and last June, a historic low going back to 1981, according to data from the National Association of Realtors.
Conclusion
The outlook for mortgage rates is uncertain, and forecasting their trajectory is difficult due to many factors, from government spending and the economy to geopolitical tensions and stock and bond market gyrations. While some economists expect mortgage rates to come down, others believe they may remain higher for longer, potentially discouraging current homeowners from selling and further limiting the purchasing power of first-time buyers.
FAQs
Q: How did Trump’s election win affect mortgage rates?
A: Trump’s election win led to a surge in bond yields, causing mortgage rates to rise.
Q: What are the factors influencing mortgage rates?
A: Mortgage rates are influenced by moves in the yield for U.S. 10-year Treasury bonds, as well as the Federal Reserve’s benchmark interest rate and the strength of the economy.
Q: What are the implications of higher mortgage rates for homebuyers?
A: Higher mortgage rates can add hundreds of dollars a month in costs for borrowers, reducing their purchasing power and limiting the number of homes they can afford.
Q: How will Trump’s economic policies affect mortgage rates?
A: Trump’s proposed economic policies, including lower tax rates and lighter regulations, could potentially set the stage for mortgage rates to move higher, as they could rev up the economy and fuel inflation.
