Mortgage rates look poised to stay stubbornly high following Donald Trump’s White House win – despite the Federal Reserve’s interest rate cuts and the president-elect’s pledges to cut homebuyers a break.
After Trump’s sweeping win on Wednesday, 30-year fixed mortgage rates briefly surged before settling at 6.98% the next day, according to Mortgage News Daily. On Friday, they settled at 6.92%.
That’s bad news for house hunters, who had hoped the Fed’s recent interest rate cuts would finally ease mortgage rates, which surged during the pandemic as government stimulus helped kickstart inflation on everything from groceries to cars.
The problem: While mortgages can often align with the Fed’s key lending rates, they are more directly tied to 10-year treasury bond yields. These treasury yields often spike on reports of strong economic growth, which can cause inflation.
The US 10 Year Treasury – which jumped to 4.475% on Wednesday – closed on Friday at 4.302%.
If Republicans gain control of the House, Trump will face fewer obstacles in pushing through his economic proposals. Investors’ anticipation of increased spending on strong economic policies could drive bond yields higher.
“Since the middle of September, there have been a series of economic data reports showing that the economy is stronger than expected,” Melissa Cohn, regional vice president of William Raveis Mortgage in New York, told CNBC. “When people have jobs and make money, they spend it, and that’s inflationary.”
Cohn said the rate cut “will be helpful to consumers who have home equity loans, car loans, and other loans that are impacted by the prime rate. But it’s not going to move the needle on mortgage rates.”
That’s because mortgage rates are not ultimately determined by the Fed. Instead, “it’s all based on economic data.” On that front, experts say some of Trump’s key policy goals could, whether or intended or not, spur higher rates.
“Proposed tax cuts by Trump, infrastructure spending, and potential tariffs on imports point toward a pro-business environment – one which could spark American manufacturing, but also raise the prices of goods imported into the US,” Shmuel Shayowitz, president and chief lending officer at Approved Funding, told The Post.
Trump’s win alone caused huge market responses – the Dow soared more than 1,000 points and Bitcoin jumped to an all-time high, Shayowitz said.
John Koch, senior investment analyst at iSectors, told The Post that none of Trump’s policies will have a direct impact on mortgage rates – the worry comes from whether or not his administration will reheat inflation.
“The risk is that because the Republican Congress will make it easier for Trump to get the policies passed that he wants, such as tariffs and lowering taxes, that inflation will not continue on the trajectory it has over the last year or so,” Koch told The Post.
“The bond market has bet on that exact scenario, as yields and mortgage rates both have increased since the first Fed interest rate cut last month. If this path continues, then mortgage rates most likely will not drop as quickly as many had hoped,” he said.
Recent reports have shown signs of cooling inflation. The personal consumption expenditures price index (PCE) showed that the overall rate at which prices rose for goods and services in September was 2.1% — the lowest since early 2021.
Illegal border crossings have been a crucial issue for Trump voters. The president-elect has promised to carry out “the largest deportation effort in American history.” He recently told NBC News there is “no price tag” for his deportation plan.
Mass deportations could make low-cost labor scarce, which is “bond unfriendly and bad for mortgage rates,” Shayowitz told The Post.
“A limited labor pool might constrict supply and drive up housing costs, which could indirectly affect mortgage rates if the Federal Reserve responds to inflationary pressures in the economy,” Maxim Manturov, head of investment research at online broker Freedom24, told The Post.
Trump’s spending plans are expected to add $7.5 trillion to the budget deficit – more than double the expected deficit under Vice President Kamala Harris, according to the Committee for a Responsible Federal Budget.
“If policies under a Trump administration and a Republican-led Congress lead to larger budget deficits, this could pressure the bond markets,” Manturov told The Post.
There is still time for mortgage rates to cool down, according to experts. The Post previously reported that rate cuts typically take 90 days to ease mortgage rates, while credit card rates and auto loans come down within a month.
Some experts disagree that mortgage rates will remain high after Trump’s win.
“I am confident that the markets will continue to calm and mortgage rates will continue [their] descent lower as traders unwind some trades based on election results,” Shayowitz said. “October and November of election years are always very volatile and the new year often brings lower rates post-elections with the new president-elect ready to take office.”
He said he would not be surprised to see a 10-year yield near or less than 4% by March 2025.
