Why a Trump Win Could Push Your Mortgage Rates Higher

The 2024 presidential election has yet to be decided, but former president Donald Trump’s economic proposals may already be affecting your wallet.

That’s according to Mark Zandi, chief economist at Moody’s Analytics, who theorized Tuesday that Trump, the Republican candidate for president, has driven up mortgage rates just by talking about his economic agenda. If that’s the case, it would partly explain why mortgage rates have risen—contrary to the expectations of some experts—in the weeks since the Federal Reserve cut its influential benchmark interest rate.

The theory goes like this: Trump has proposed raising tariffs on imports, deporting large numbers of immigrants, and cutting taxes steeply, among other things. Many economists believe those policies would lead to high inflation. For example, a recent analysis by Oxford Economics showed that annual inflation, as measured by core PCE prices, would be 0.4% higher after a Trump victory than if Kamala Harris won.

Mortgage rates are set in part by financial markets and tend to go up when investors believe inflation will be high in the future. And although multiple polls show next Tuesday’s election as a tossup, Trump’s odds have risen in political betting markets, possibly influencing traders who make decisions based on their expectations of future economic conditions.

“Investors are taking Trump at his word and believe if he wins, it will lead to higher tariffs, immigrant deportations, and deficit-financed tax cuts in a full employment economy, all of which means higher inflation and more government borrowing,” Zandi posted on social media platform X. “The recent surge in mortgage rates is a clear indication what investors believe a Trump victory would mean for the economy and the nation’s fiscal outlook.”

Mortgages vs. The Fed

The average rate for a 30-year fixed mortgage last week was 6.54%, up from 6.09% the week the Fed announced its first rate cut since 2020, according to data from Freddie Mac. That uptick added about $75 to the monthly mortgage payment for a median-priced home, which was already beyond unaffordable for many would-be buyers.

The rise was counterintuitive given that the Fed had just cut its benchmark fed funds rate—the rate that determines how much it costs banks to borrow from one another—by half a percentage point.

The fed funds rate directly influences interest rates for credit cards and card loans, which are tied to banks’ prime rates. However, the fed funds rate’s relationship to mortgage rates isn’t as straightforward, and it often moves in anticipation of future fed rate cuts rather than reacting to them. For example, mortgage rates plunged ahead of the Fed’s rate cut move in September.

Specifically, mortgage rates tend to rise and fall along with yields on 10-year Treasurys, which have surged in recent weeks. The rally has been fueled in part by Trump’s perceived chances of winning the election, some economists said.

Another factor at play is that recent economic reports show the economy is performing better than forecasters have expected, with businesses hiring more people and consumers spending more money than anticipated. A healthy economy means the Fed could be in less of a hurry to cut rates than previously thought.

In the long run, though, a lower fed funds rate could eventually lower mortgage rates. As long as inflation continues its recent cooling trend, the Fed is likely to gradually cut rates over the coming months. Forecasters at Fannie Mae, for example, predict the average 30-year mortgage will fall to 6% at the end of the year and 5.6% by late 2025.