What Donald Trump’s Presidential Election Win Means for Mortgage Rates

Donald Trump cruised to victory in Tuesday’s election, a contest in which inflation and the high cost of living played a key role. 

Trump promised throughout the campaign to lower mortgage rates as voters across the country expressed frustration about the high cost of homeownership. Presidents do not set mortgage rates but their policies can move interest rates, and much of that impact is realized through Treasury yields.

Treasury yields surged on Wednesday in response to Trump’s win. The yield on the 10-year Treasury climbed nearly 20 basis points to 4.48%, its highest level since early July. Yields climbed steadily over the last month and a half as uncertainty about the election mounted and Wall Street tempered its expectations for aggressive Federal Reserve rate cuts.

What To Expect From Mortgage Rates

Experts say Wednesday’s jump in Treasury yields is likely to lift mortgage rates in the near term, though they’re unlikely to return to their recent peak.

“We should expect mortgage rates to continue to rise in the coming weeks based on the trend in post-election yields,” wrote Ralph McLaughlin, senior economist at Realtor.com, in a note on Wednesday. “The good news is we still expect the long-run trend in rates to be downward as the fight against pandemic-induced inflation comes to an end.”

Higher yields—a reflection of the market’s expectation that Trump’s second term will deliver stronger growth and higher inflation—could have a long-term impact on rates.

“While we still expect mortgage rates to stabilize by the end of the year, they will likely be at a higher level than markets were initially expecting prior to election week,” McLaughlin said.

The average 30-year mortgage rate was 6.72% last week, according to Freddie Mac. That’s down from the most recent peak of 7.79% in October 2023 but up from 6.08% the week after the Federal Reserve cut its benchmark interest rate for the first time since 2020.

What Trump’s Win Means for Fed Rate Cuts

Trump’s victory has cast even more doubt on the speed and depth of further rate cuts. The overwhelming majority of market participants still expect the Fed to cut interest rates by 25 basis points Thursday at the end of its two-day policy meeting, but the chance policymakers hold off on making another cut in December increased to nearly 30% on Wednesday.

Economists at Nomura raised their forecast for the terminal fed funds rate—the level at which policy rates are neither restrictive nor accommodative—to 3.625% from 3.125%, a decision they attributed to the economic impact of Trump’s policy proposals. The fed funds rate is currently in a range of 4.75%-5.00%.

Trump has pledged to implement a tariff as high as 20% on all U.S. imports, a move economists say would raise prices for importers and consumers alike. Nomura analysts don’t think Trump’s tariffs will go quite that far, but they still expect import duties to rise from an average rate of 2.5-3% today to 11-12% in 2026. They forecast that will lift inflation to 3.1% in 2025 and 2.7% in 2026, up from their prior forecast of 2.3% and 2.1%, respectively.

“Higher tariffs should be stagflationary, weighing on personal consumption and business investment,” they wrote. “The inflation shock from tariffs will also likely lead to fewer Fed cuts and higher borrowing costs.”

Why a Bigger Deficit Could Mean Higher Rates

Trump’s re-election has also recalibrated Wall Street’s long-term expectations for the federal debt, another key determinant of Treasury prices and yields. 

Trump has promised to extend the provisions of 2017’s Tax Cuts and Jobs Act that are expiring next year. Researchers at Oxford Economics forecast Trump’s tax plans would increase the federal budget deficit by $3 trillion between 2026 and 2033. 

“The federal budget is already on an unsustainable trajectory, but federal fiscal conditions will worsen relative to our prior baseline assumption,” wrote those researchers in a note on Wednesday. 

From the market’s perspective, America’s ballooning national debt is a liability. The risk that comes with a larger budget deficit could compel investors to demand a higher return on Treasury debt, putting upward pressure on yields and the interest rates that they underpin.