Mortgage rates have surged since the election of Donald Trump as President of the United States on November 8th, 2016, but experts and previous data suggests this spike will only last for a few weeks or a few months at most.
Past data concerning elections suggest that with major regime change comes a short term rate spike caused by uncertainty in the home loan market, but major changes over the long term come from significant shifts in the new President’s fiscal and regulatory policy.
Consider these factors in deciding whether lock in your mortgage rate now, or wait:
Short Term Consumer Confidence
Consumer confidence typically plays a role in the inflation and deflation of the housing market, which usually leads to a shift in mortgage rates, but this year’s election suggests consumer confidence won’t shift rates much.
Since President Trump won most of the states between the expensive coastal regions, at best the market would follow party lines and the home price index would converge between the red and blue states.
Long Term Regulatory Policy
As a real estate tycoon, President Trump knows a large amount about the real estate market and how to push it in certain directions. He is also considered a New York elite, however, which means he could push fiscal policy moves that benefit big banking and hurt consumers.
Home Building Regulation
Trump has mentioned in campaign speeches that not enough Americans own homes in today’s market, a statistic often equated to “the American Dream”. The reason, according to the 2016 President-elect, is because regulation as mired the business of home building to the degree that it pushes up the housing costs to a level that is no longer affordable.
If homes become more affordable, mortgage rates will likely drop as a way to help push more consumers into the housing market.
As we now know, sub-prime lending played a large part in the economic collapse of 2008, and the terms of big bank bailouts were in the form of heavy regulation over Wall Street banks moving forward.
Trump has made statements that suggest he wants to de-regulate big banks, which would likely encourage sub-prime lending once again. As a response, the Federal Reserve would likely increase mortgage interest rates as a way to slow down the reckless market.
In our opinion, we don’t think anyone should be shocked by the sudden spike in mortgage rates after President Trump’s election, and lock into a rate with too much haste. In fact, a spike is normal when the Presidency changes party hands. We do, however, suggest keeping an eye on the fiscal and economic policy decisions that the new President makes when he enters the country’s highest office in January, and make a decision based on the trends then.