Trump's Policies Could Keep Mortgage Rates High Through 2025, Experts Warn
Mortgage Rates May Remain Elevated Under Trump Administration
Recent analysis suggests that mortgage rates, initially expected to decrease by 2025, may remain elevated due to President-elect Donald Trump’s proposed policies. Industry experts point to several factors that could influence mortgage rates, including inflation expectations and government debt.
In the lead-up to the election, mortgage rates experienced a notable shift. After a significant decrease in September, rates climbed in October as the election approached. Bond investors anticipated that Trump’s policies might lead to increased inflation and a larger deficit, causing yields and mortgage rates to rise. Strong economic data, including positive employment figures and robust consumer spending, further contributed to higher yields and mortgage rates.
Predicting future mortgage rates remains challenging due to the unpredictable nature of Trump’s policy proposals. However, some economists suggest that tariffs proposed by the President-elect could reignite inflation, potentially leading to higher mortgage rates. Moody’s Analytics forecasts that Trump’s tariffs and deportation plans could push inflation to 3.5% by 2025.
The implementation of tariffs on imports could make consumer goods more expensive, contributing to inflationary pressures. Higher inflation might prompt the Federal Reserve to pause rate cuts or even consider raising rates, thus maintaining elevated mortgage rates.
Trump’s plans for further tax cuts could also play a role in keeping mortgage rates high. An increased government deficit might necessitate the issuance of more Treasury securities, potentially leading to higher interest rates across the board.
The impact of Trump’s policies on housing supply remains uncertain. While mass deportation plans might not necessarily free up housing supply, they could exacerbate existing issues in the construction industry. Many construction workers are immigrants, and deportations could reduce the available workforce, potentially increasing construction costs.
However, Trump’s focus on deregulation could have a positive impact on housing supply by easing building restrictions. An increase in housing supply could moderate home price growth, potentially improving affordability despite high mortgage rates.
As the new administration prepares to take office, homebuyers and industry professionals alike will be closely monitoring these potential policy changes and their effects on the mortgage market.
