Looks like the bond market was right after all. Trump won the presidential election AND Republicans took control of the House and Senate. So, what should homebuyers expect for the next 4 years?

Well, so far the bond market has reacted positively to the idea of a Trump presidency.  
The average rate on a 30-year fixed rate conventional loan finally started falling - down to  6.70% (from 6.76% last week), but we've actually seen rates improve by about 0.25%!  Sign up for our weekly Friday rate texts to see all the great options LendFriend provides to homebuyers! 

Trump And Mortgage Rates

Trump has said MANY times that he wants mortgage rates to fall, but as I wrote about last week, concerns about Trump's tariff plans and policies that economists believe would accelerate a growing deficit had pushed mortgage rates higher in the weeks leading up to the election. So, what's his plan to get rates to fall?

Ralph McLaughlin, senior economist for Realtor.com said “There aren’t a lot of policies that the president has at his disposal that can really lower rates", and McLaughlin is right. However, Trump has been trying to exercise greater control over the Federal Reserve. One way to exercise greater control may be to try to influence Federal Reserve decisions, whether directly or by proxy - which is something we saw from 2016-2020!

Good news for Powell - under the current law, the president can’t fire Powell or any member of the Fed’s Board of Governors without “cause,” so removing any of those members because of a disagreement over interest rates would be challenged in court. And Powell has already said - he isn't leaving!

Since Trump's win there's been renewed interest to "End the Fed" - a term made popular by Ron Paul with Elon Musk being the most notable supporter. But this movement doesn't have much support, at least not yet.

The Fed Cuts Rates Again!

While not as exciting as the first rate cut in September, the Fed decided to cut the federal funds rate by another quarter point  last Thursday.  The federal funds rate now sits at 4.5-4.75%. 

Mortgage rates have mostly gone UP between the September rate cut and the November rate cut because while today's Fed Funds Rate can influence mortgage rates, mortgage rates take a longer term economic view. So what happens next?

Powell seemed happy with the progress of inflation and the overall condition of the labor market.  Powell said, "we think that the economy, and we think our policies, are both in a very good place, a very good place." That's as positive as this man can get!

Elyse Ausenbaugh, head of investment strategy at J.P. Morgan Wealth Management said "The easy cuts have been made, and maybe [a cut during the  December 18th meeting]  won't be too contentious either... Thereafter, I imagine the Fed is asking the same questions as investors - to what extent and when will the incoming Trump administration implement its campaign policy proposals?"
 
A third rate cut this year isn't a sure thing. Analysts put odds on a third rate cut at 66.6% right now. Of course that can change based on any data that comes in between now and the December 18th meeting! Homebuyers need to see a lot more rate cuts if we're hoping to see mortgage rates in the 4s.