Rates are inching down slightly after shooting up before the election—volatility that’s to be expected as investors try to figure out the impact of a Trump presidency. Rates will likely remain elevated if President Trump moves forward with the higher tariffs and tax cuts he has discussed.
Mortgage rates shot up in the weeks leading up to the U.S. presidential election, but are now falling slightly. The average interest rate on a 30-year-fixed mortgage currently sits at 6.92%, down from its recent peak of 7.13% on November 6. Here’s what’s going on:
Why are mortgage rates ticking down?
Rates rose significantly leading up to the election as bond market investors increasingly became convinced that Donald Trump would win, and continued their upward trajectory immediately after the election. What happened yesterday and today is they gave some of that gain back, which is a typical pattern as markets do price discovery (AKA figure out what the right price level is after a significant event). General volatility is to be expected while investors try to figure out to what extent Trump’s policies will be implemented and what the impact on economic conditions will be.
Why did mortgage rates jump before the election?
The dominant force driving mortgage rates is two potential policy changes that Trump and Republicans have proposed: higher tariffs and more tax cuts.
- Higher tariffs: Trump has talked about a 60% tariff on goods coming from China and a 10-20% tariff on goods coming from other countries. Current tariffs average about 16% on goods from China and around 3% on goods from other countries. Higher tariffs generally lead to higher prices, which means higher inflation and higher rates. There is a lot of uncertainty about when and to what extent these tariffs would get enacted by President Trump (he does not need Congressional approval). Currently, investors have priced in that President Trump would enact a small but meaningful fraction of what he has proposed.
- More tax cuts: The Tax Cuts and Jobs Act (TCJA) expires at the end of 2025. With a Republican sweep, investors are expecting that Congress will make nearly all provisions permanent and enact additional tax cuts. This increases government debt, meaning greater Treasury issuance and higher rates.
What are mortgage rates expected to do moving forward?
Rates will remain elevated and volatile as bond markets digest the election results and form opinions about the most likely policy outcomes associated with a Republican sweep of the White House and Congress.
Economic conditions and Fed policy still do matter. In particular, if we get very weak economic data (more likely than very strong economic data right now), the Fed would need to cut their policy rate more and faster than anticipated, which would lead to lower mortgage rates. The Fed would prioritize stabilizing the economy via lower rates over policies that only may happen in the future. However, if higher tariffs were implemented quickly by President Trump and there was evidence of higher inflation, the Fed would prioritize reducing inflation over propping up the economy, meaning they would err on the side of higher rates.
The Fed meeting happened yesterday. Did any significant news come out of it?
The Fed’s meeting yesterday did not move markets and is likely not the reason rates are falling today. The Fed cut interest rates by 25 basis points, but that was entirely priced in and the press conference offered very little new information—except that Chair Jerome Powell would not step down if President Trump asked him to. The fall in rates yesterday happened before the Fed meeting.
What other factors could impact the housing market when Trump becomes president?
- Immigration: Immigrants are a large portion of the construction labor force, so restricting immigration would make housing more costly to build. Recent immigrants are also unlikely to account for much housing demand so limiting immigration would not help to reduce demand by much.
- Deregulation: President Trump may want to open more federal land for building, but otherwise has not been specific about his plans for deregulation. Much of the regulatory burden for building housing is at the local, not federal, level.
- The CFPB: President Trump is likely to reduce staffing at the Consumer Financial Protection Bureau as he did in his first term, which could mean fewer guardrails for consumer lending products like mortgages.
- Privatizing the GSEs: President Trump was interested in privatizing the government-sponsored enterprises Fannie Mae and Freddie Mac during his first term. Such an action could lead to marginally higher mortgage rates—as there would be less of an explicit government guarantee on mortgages—but perhaps more product innovation.
- TCJA provisions related to homeownership: Making permanent these provisions generally reduces the tax benefits of homeownership, particularly in high-tax blue states.
See below for other election-related reports Redfin has published over the last several months:
- 38% of People Who Already Voted Say Housing Affordability Impacted Their Presidential Pick
- Roughly 4 in 5 U.S. Residents Believe There Should Be Caps on Rent Hikes: Survey
- Nearly 1 in 5 People Have Gotten in a Disagreement With a Neighbor Over Politics: Redfin Survey
- Nearly A Quarter of Prospective First-Time Homebuyers are Holding Off Until After the Election: Redfin Survey
- Renters Are Nearly Twice as Likely as Homeowners to Say Housing Affordability Impacts Their Pick for President: Survey
- 42% of Homeowners Believe Trump Would Be Best For Keeping Home Values High, While 35% Believe Harris Would Be Best
- 7% of Gen Zers Who Plan to Move Soon Cite Abortion Access as a Reason: Survey
- Trump vs Harris: Renters Debate Who Is Better for Housing Affordability
- Typical Swing State Renter Earns 17% Less Than Needed to Afford Typical Apartment—But That’s an Improvement From the Last Presidential Election
- Arizona and Nevada Have Lost Tens of Thousands of Registered Democrats Since the Last Presidential Election
- Here’s What a Kamala Harris Presidency Could Mean For the Housing Market
- Here’s What a Second Trump Presidency Could Mean For the Housing Market
- In Swing States, Typical Homebuyer’s Monthly Payment Has Nearly Doubled Since The Last Presidential Election
- Redfin Economist Q&A: How Will Housing Affordability Impact the Presidential Election?
