How Will the Election Impact Mortgage Rates?

The Fed has put a lot of effort into reducing inflation, but even with recent Fed rate cuts, mortgage rates are spiking again. It seems that the recent election results have put the Fed on a path for for fewer rate cuts. After the election, mortgage rates surged higher causing housing stocks to fall. In fact, the average rate on the 30-year fixed mortgage jumped 9 basis points Wednesday (Nov 5) to 7.13%, according to Mortgage News Daily. That is the highest rate since July 1 of this year, though not quite the increase some had expected. 

The reality is that expectations of higher government spending and lower taxes under the new administration have driven up the 10-year Treasury yield, which is tied closely to mortgage rates. Per HousingWire, mortgage rates are expected to similarly increase, and could reach 8%. According to CNET, ongoing rate cuts, combined with cooler inflation and slower economic growth, should allow Treasury rates to fall as we move forward. But mortgage rate movements won’t be linear, and are dependent on multiple factors.

That's the short-term news. Looking further out, it is more difficult to say where rates will go in the next 12 months. There are many "what ifs" related to ideas on tariffs and mass deportation and the impact on inflation. At the same time, Speaker of the House Mike Johnson has already said that Republicans intend to remove a significant amount of regulation enacted during the Biden years. The Mortgage Bankers Association has also said it is optimistic there would be less red tape and fewer regulatory costs under the new administration. Over the next four years, that could reduce the costs associated with mortgage lending. 

The Republican Party also notes that it would promote homeownership through tax incentives and support for first-time buyers, but those details have yet to be shared. To sum things up, RisMedia shared, “While we still expect mortgage rates to stabilize by the end of the year, they will likely be at a higher level than markets were initially expecting prior to election week." This quote comes from Realtor.com Senior Economist Ralph McLaughlin.

In our own recent Plus Spotlight webinar on the mortgage vertical, we brought in the expertise of David Schroeder, the Chief Revenue Officer of NewRez LLC. David provided some interesting insights on the mortgage industry and some of the unique aspects, services, and products that are available to relocating employees. He also shared some great perspective on where rates have been, where they are currently, and what we might expect in the future. While there are many details yet to become clear, he conveyed optimism about the potential for corporate growth. Given the response of the stock market to the election, that means hope for increased activity and more investment into talent mobility.  

David reminded us that historically speaking, mortgage rates are still supportive of home ownership. But as they have been coming down over the past 10 to 15 years, and hit an all-time (maybe once in a lifetime) low in 2022, many homeowners locked in or refinanced into the best mortgages ever. Those low rates are hard to leave. However, life moves on, and inflation and the broader economy have had an impact for sure. As opposed to a crystal ball, he shared we need to watch things like the U.S. 10-year Treasury yield and housing inventory to assess affordability. He feels that if inflation stays somewhere near where it is, mortgage rate changes will probably stay relatively flat, not moving dramatically higher or lower over the next year and maybe getting to the low 6 percent area or high 5 percent. 

With optimism and the guide of history, Schroeder said "Relatively low inventory and high rents are pushing home values to gain momentum, and investing in a home, if you can, is still a really strong investment for wealth creation”. Some have said buyers should “marry the house and date the rate” meaning that buyers should find the right property for them and  refinance over time as rates drop. 

It would be expected that putting the money into homeownership would likely return more than renting. According to recent data, over the last five years, housing values in the United States have seen a significant increase, with the most notable surge occurring during the pandemic, reaching a peak of around 18% growth in 2021. However, the market has since cooled, with more moderate increases in recent years averaging around 5-6% annually depending on the source.

For the full conversation of our interview with David Schroeder, go here: