After Donald Trump’s election victory, bond yields surged, triggering the “Trump trade.” Experts predict that this trend will push mortgage rates higher, despite the Federal Reserve’s recent interest rate cut. Homebuyers and those looking to refinance should consider locking in a rate in the coming weeks before they climb further.
Why Mortgage Rates May Keep Rising
“Rates are heading in a direction that suggests investors are bracing for more inflation or stronger economic growth,” said Danielle Hale, chief economist for Realtor.com. “Either way, it seems likely that mortgage rates will rise in the short term.”
The Fed’s quarter-point rate cut was widely expected. While mortgage rates typically track the Fed’s benchmark, recent trends have diverged. In September, after a 50-basis point Fed rate cut, the average 30-year fixed mortgage rate was 6.20%, according to Freddie Mac data. This week, it’s climbed to 6.79%.
The Impact of Trump’s Policies on Mortgage Rates
Mortgage rates aren’t likely to fall soon, according to Bright MLS Chief Economist Lisa Sturtevant. “Trump’s fiscal policies are expected to push mortgage rates higher and make them more volatile through the end of this year and into 2025,” she said. “Bond yields are rising because investors expect Trump’s proposed policies will widen the federal deficit and reverse progress on inflation.”
Sturtevant notes that Trump’s tax cuts could increase government debt, driving up borrowing costs. His tariff proposals could also lead to higher prices. “If inflation rebounds, the Fed may hesitate to continue cutting rates, and mortgage rates could stay elevated for a longer period,” she added.
Is Now the Time to Lock in a Mortgage Rate?
Nina Gidwaney, head of refinance and home equity at Chase Home Lending, cautions that it’s “nearly impossible” to time the market. “We believe the market has already priced in a 25-basis point Fed rate cut, which is reflected in current mortgage rates,” she said. However, Danielle Hale believes homebuyers and refinancers might have a short window of opportunity to secure a lower rate if market conditions stabilize over the next few weeks.
“Markets often overreact, and some of what we’re seeing now could be an overreaction,” Hale told USA TODAY. For buyers, the last weeks of the year may present an opportunity. The number of homes listed for sale has been rising steadily, hitting pre-pandemic levels in October, according to Realtor.com data. Additionally, prices have softened slightly, with the national median price of homes listed at $424,950—flat compared to a year ago.
Challenges Ahead for Homebuyers
However, these trends may not last long. “The housing market was just beginning to stabilize after the unprecedented disruptions of the pandemic,” Sturtevant said. “The next few months could be challenging for prospective homebuyers.”
For those considering purchasing a home or refinancing, acting quickly to lock in a rate could be essential as mortgage rates are likely to rise in the near future.
