Mortgage rates are expected to remain high following Donald Trump's White House victory, despite the Federal Reserve's interest rate cuts and the president-elect's pledge to pause homebuyers.
After President Trump's landslide victory on Wednesday, 30-year fixed mortgage rates briefly rose, but settled at 6.98% the next day. According to Mortgage News Daily. It settled at 6.92% on Friday.
That's bad news for home hunters who were hoping the Fed's recent interest rate cuts would finally ease mortgage rates. Mortgage rates have soared during the pandemic as government stimulus has fueled inflation on everything from groceries to cars.
The problem: Mortgages are often tied to the Fed's key lending rate, but they are tied more directly to the 10-year Treasury yield. Yields on these bonds often rise sharply on reports of strong economic growth, which can lead to inflation.
The 10-year U.S. Treasury note soared to 4.475% on Wednesday, but ended Friday at 4.302%.
If Republicans control the House, Mr. Trump will face fewer obstacles in pushing his economic proposals. Investors are expecting increased spending on strong economic policy, which could push bond yields higher.
“Since mid-September, there have been a series of economic indicators reporting that the economy is stronger than expected,” said Melissa Cohn. Regional Vice President, William Labais Mortgage Co., New Yorkhe told CNBC. “When people have jobs and earn money, they spend it. That's inflation.”
Cohn said the rate cut “will help consumers with home equity loans, auto loans, and other loans that are sensitive to the prime rate.” But it won't move the needle on mortgage rates. ”
That's because mortgage rates are not ultimately determined by the Fed. Instead, “everything is based on economic data.” In this regard, experts say some of President Trump's major policy goals could, intentionally or not, prompt interest rates to rise. It is pointed out that there is.
“President Trump's proposed tax cuts, infrastructure spending, and possible import tariffs point to a pro-business environment that could stimulate U.S. manufacturing, but also raise the prices of goods imported into the U.S. “It's possible,” said Shmuel Shajowitz, president and loan officer. Approved Funding officials told the Post.
Trump's victory alone triggered a huge market reaction, with the Dow soaring more than 1,000 points and Bitcoin soaring to an all-time high, Shayowitz said.
John Koch, senior investment analyst at iSectors, told the Post that none of President Trump's policies will have a direct impact on mortgage rates. He said his concern is whether the Trump administration will reheat inflation.
“The risk is that inflation won't continue on the trajectory it has over the past year because a Republican Congress will make it easier for Mr. Trump to pass the tariffs, tax cuts and other policies he wants,” Koch said. he told the Post.
“Both yields and mortgage rates have risen since the Fed's first rate cut last month, so the bond market is betting on exactly that scenario. If this path continues, mortgage rates will fall as many expect. “It's likely that it won't decline as quickly as it used to,” he said.
Recent reports show signs that inflation is slowing. According to the Personal Consumption Expenditure Price Index (PCE), overall prices of goods and services increased by 2.1% in September, the lowest level since the beginning of 2021.
Illegal border crossings have become a key issue for President Trump voters. The president-elect has promised to carry out “the largest deportation operation in American history.” he recently told NBC News His deportation plan “has no price tag.”
Mass deportations could create a shortage of low-wage labor, which would be “bad for bonds and bad for mortgage rates,” Shayowitz told the Post.
Maxim Manturov, head of investment research at online brokerage Freedom 24, said: “A limited workforce could limit supply and increase home prices. “If we take action, it could indirectly impact mortgage rates,” he told the Post.
President Trump's spending plan is expected to increase the budget deficit by $7.5 trillion – More than double the expected deficit Under Vice President Kamala Harris, according to the Committee for a Responsible Federal Budget.
“If policies under the Trump administration and Republican-led Congress lead to higher budget deficits, that could put pressure on bond markets,” Manturov told the Post.
Experts say it will still take some time for mortgage rates to stabilize. The newspaper previously reported that mortgage rate relief typically takes 90 days to reduce, while credit card and auto loan rates can be lowered within a month.
Some experts disagree that mortgage rates will remain high even after President Trump's victory.
“We are confident that the market will continue to stabilize and mortgage rates will continue to rise.” [their] “The decline has fallen further as traders unwind some trades based on the election results,” Shajowitz said. “October and November of an election year are always very volatile, and in the new year after the election, when the new president is ready to take office, interest rates are often lowered.”
He said he wouldn't be surprised if the 10-year Treasury yield was near or below 4% by March 2025.
