Economic Response to Trump Presidency

Following the Federal Reserve Bank meeting last week pundits around the globe have been working at predicting future financial markets under a Donald Trump presidency.  Personally, I’m holding my tongue.  However, the following comments come from one of the many mortgage brokers who keep me aware of changes in the lending market.

Not only did the election of Donald Trump rock the U.S. political establishment, it has had a major influence on interest rates as well—resulting in the economy’s single biggest post election shift. Interest rates on 30-year conforming mortgages have moved up by more than 50 basis points since the election on Nov. 8. (A single basis point is 0.01%.) That means that within just a few weeks, mortgage rates have moved to levels we haven’t seen in more than two years.

So what does that rate shift mean? Well, it indicates an economy with very low inflation moving to one with more significant inflationary pressures.

In real terms, the movement in rates so far has increased mortgage payments by 7%. On a median-price home, that shift amounts to more than $750 in additional interest per year. Make no mistake: That is bad news for future buyers.

This week, the average 30-year mortgage had a rate of 4.27%. Over the past five years of the housing recovery, rates have failed to stay above 4%. But things look different this time around. Rates are more likely to go up from here rather than down. And that means that now more than ever, potential buyers need to be working hard to secure the best rate possible on their own mortgage.

It’s easy to see the immediate impact on buyers.  There are also work-around plans that can help buyers achieve their goals despite the higher rates.

Interest rate increases generally hurt sellers at least as much as buyers, and in some very diverse ways.  Over the next few publications we hope to discuss how sellers can mitigate the impacts.  Keep in touch and we’ll be certain to let you know about those special releases.