LOS ANGELES — Donald Trump’s election victory darkens the outlook for mortgage rates even before he returns to the White House.

The president-elect campaigned on a promise to make homeownership more affordable by lowering mortgage rates through policies aimed at eliminating inflation. But the proposed economic package could potentially pave the way for higher mortgage rates, some economists and analysts say.

Mortgage rates are influenced by several factors, including changes in the yield on the 10-year U.S. Treasury note, which lenders use as a guide in pricing home loans. Treasury yields have been rising in recent weeks, even after the Federal Reserve cut its benchmark interest rate, which influences rates on all types of loans, including mortgages. Investors appear to be wondering how much the Fed should cut rates given the strength of the economy.

Then, yields rose again immediately after Trump’s victory, pushing up the average rate on a 30-year mortgage. at 6.79%according to mortgage buyer Freddie Mac.

“Given what we’re seeing in the bond markets, investors are expecting higher rates under the Trump administration and are already starting to position themselves in that direction,” said Danielle Hale, chief economist at Realtor. com. “So if overall rates are higher, that would also tend to mean that mortgage rates would rise as well.”

Trump says he wants to impose tariffs on foreign goods, cut tax rates and ease regulations, policies that could revive the economy, but also fuel inflation and increase the US government’s debt – and, according to some economists, lead to higher interest rates and, therefore, higher interest rates. higher mortgage rates.

“Trump’s fiscal policies can be expected to lead to rising and more unpredictable mortgage rates through the end of this year and into 2025,” said Lisa Sturtevant, chief economist at Bright MLS , which no longer forecasts the average rate of a house over 30 years. ready to drop below 6% next year.

Homebuilding industry analysts at Raymond James and Associates believe mortgage rates will remain “higher for longer” given the election outcome. They also said in a research note last week that first-time home buyers “will likely face even greater affordability challenges this spring,” typically the peak sales season of the year for builders. of houses.

Higher mortgage rates can add hundreds of dollars per month to costs for borrowers, reducing their purchasing power at a time when home prices remain near record levels despite a housing market. decline in sales dating back to 2022.

High mortgage rates and high prices have made homeownership out of reach for many first-time buyers. They accounted for just 24% of all homes purchased between July 2023 and last June, a historic low dating back to 1981, according to data from the National Association of Realtors. Before 2008, the share of first-time buyers was historically 40%.

As more Americans find themselves priced out of homeownership or forced to delay home purchases, they are missing out on the potential gains of growing home equity, which has always been a powerful driver of personal wealth.

Additionally, higher mortgage rates may discourage current homeowners from selling. Although the average rate on a 30-year home loan fell last year from a 23-year high of nearly 8 percent, it remains too high for many potential sellers. More than four in five homeowners with a mortgage have an existing rate below 6 percent, according to Realtor.com.

The rise in bond yields last week likely reflects investor expectations that Trump’s proposed economic policies would widen the federal deficit and increase inflation.

The nonpartisan Committee for a Responsible Federal Budget projects that Trump’s proposals would increase the federal budget deficit by $7.75 trillion over the next decade.

To pay the interest on this debt, the government will likely have to issue more bonds, such as 10-year Treasury bills. This could cause investors to demand higher yields or the return they receive from investing in bonds. As these yields increase, it would cause mortgage rates to rise.

If inflation were to rise again, the Fed may have to halt the rate cuts it began in September. Inflation fell on an annual basis from a peak of 9.1% in 2022 to a 3 1/2-year low of 2.4% as the Fed raised rates to their highest level since decades.

Although the central bank does not set mortgage rates, its actions and the path of inflation influence the movement of the 10-year Treasury yield. The central bank’s policy change should eventually pave the way for a general decline in mortgage rates. But that could change if the next administration’s policies push inflation into high gear again.

“The general expectation is that there are still plenty of reasons to expect mortgage rates to fall, but politics is a pretty big wild card,” Realtor.com’s Hale said.

Predicting how mortgage rates will move is difficult, since rates are influenced by many factors, from government spending and the economy to geopolitical tensions and fluctuations in the stock and bond markets.

Before the election, housing economists generally expected the average rate on a 30-year mortgage to drop by the end of this year to about 6 percent, then fall further next year. Now, economists at the Mortgage Bankers Association and Realtor.com expect the average rate to hover around 6% next year, while those at First American say it’s possible rates could fall to around 6%, but this is not a given.

Chen Zhao, head of economic research at Redfin, said, “It’s pretty hard to imagine mortgage rates below 6% next year, barring a recession.”

The National Association of Realtors estimates that the average rate on a 30-year mortgage will rebound to between 5.5% and 6.5% during Trump’s second term.

“If the Trump administration can present a credible plan to reduce the budget deficit, then mortgage rates can come down,” said Lawrence Yun, NAR chief economist.

Either way, don’t expect mortgage rates to return to the lows they reached during Trump’s first term, which began in late January 2017 and ended four years later.

At the time, the average rate for a 30-year mortgage ranged from a record low of 2.65% to 4.94%. Mortgage rates fell sharply in the final year of Trump’s first term as the economic fallout from the COVID-19 pandemic led investors to seek the safety of U.S. government bonds, sending their yields tumbling .

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