Are Mortgage Rates Headed Up or Down? What Trump’s Win Means for You

As we welcome former President Trump back into office with a Republican-led Senate, mortgage rates have responded with an initial spike.

But what does this mean for homebuyers and homeowners? Will rates keep climbing, or is there a chance they’ll dip back down? Let’s look at the factors in play and why there's room for optimism.

1. Immediate Market Reaction: Rates on the Rise

The initial jump in mortgage rates post-election reflects market uncertainty. Whenever there’s a significant shift in government leadership, markets tend to react quickly, often resulting in short-term fluctuations. While these early movements can be alarming, they’re not always a lasting trend. Historically, rates may adjust over time as markets settle and policy plans unfold.

2. The Federal Reserve’s Approach: To Raise or Not to Raise?

With potential tariff policies and economic initiatives, some expect Trump’s policies to increase inflationary pressures. The Federal Reserve typically responds to inflation by raising rates, which can push mortgage rates higher. However, the Fed also has a responsibility to balance economic stability. If higher mortgage rates put undue strain on housing and employment, the Fed might avoid aggressive rate hikes, aiming to support both buyers and the economy.

3. Economic Growth vs. Housing Affordability

Trump has long advocated for policies to promote American manufacturing and economic growth. Part of this strategy includes boosting exports, which could make a case for keeping interest rates—mortgage rates included—relatively low to maintain affordability. For instance, by keeping the dollar competitive for exports, a lower interest rate environment could support more affordable housing, a priority Trump has expressed interest in before.

4. Manufacturing & Housing: A Delicate Balance

Trump’s economic strategy emphasizes boosting U.S. manufacturing, which benefits from a lower-valued dollar. To support this, the administration may favor lower mortgage rates that make housing more accessible and affordable for workers. Keeping rates in check can stimulate demand, particularly for entry-level homes, and sustain jobs in residential construction, which tend to be sensitive to mortgage rate changes.

5. Tariffs & Trade Wars: Likely Delayed

Although some speculate about new tariffs impacting inflation and rates, Trump’s previous term showed a more phased approach to trade policy. During his first term, tariff adjustments were introduced gradually and only after specific tax measures were established. This pattern suggests any significant trade policies might roll out later, reducing the immediate impact on mortgage rates in the short term.

6. Market Volatility: Expect Some Ups and Downs

With any change in government, markets experience waves of optimism and caution. Mortgage rates may see ups and downs in the coming months as policies are defined and investors react. This volatility can be unsettling, but it often settles over time as the economy adjusts to new leadership and policies.

What’s Next for Mortgage Rates?

For those considering buying or refinancing, mortgage rates could go either way in the coming months. The initial jump we’ve seen might not hold, especially if Trump’s policies ultimately support economic growth and stable interest rates. As markets adjust and the Federal Reserve balances inflation with employment goals, a stable or even reduced rate environment may become more likely.

While no one can predict with certainty where mortgage rates will land, it’s clear that Trump’s priorities on manufacturing, export competitiveness, and economic stability suggest a possible balance between economic growth and affordable housing. As we navigate this new term, there are reasons to stay positive about opportunities in the housing market.