Mortgage Rates Surge on Trump Victory, Housing Stocks Plummet

The U.S. presidential election has resulted in a surge in mortgage rates, with the 30-year fixed rate climbing to 7.13% (Mortgage News Daily) following Donald Trump's victory. This rise, driven by a higher 10-year Treasury yield, has spooked housing stocks, leading to significant declines for builders and materials companies. Investors fear Trump's policies, including higher tariffs and tax cuts, could boost inflation and increase government borrowing, pushing up long-term interest rates.

Mortgage rates have been on the rise in recent weeks as investors priced in a higher likelihood of a Trump victory. His economic proposals, such as increased tariffs and immigration reforms, are seen as inflationary, driving up long-term bond yields and, consequently, mortgage rates. According to Mark Zandi, chief economist at Moody's Analytics, investors believe a Trump victory would lead to higher inflation and more government borrowing, pushing up mortgage rates.

The surge in mortgage rates has had a ripple effect on the housing market. Housing stocks have reacted negatively, with builders and material companies falling sharply due to the sensitivity of their stocks to mortgage rates and inflation expectations. The expectation among bond traders coming into the election was that rates would move higher in the event of a Trump victory, and this has been reflected in the market's reaction.


The path ahead for mortgage rates and housing stocks is uncertain, as the election outcome remains unclear. Investors may continue to price in a higher risk premium, driving mortgage rates and Treasury yields higher. This could further dampen housing stocks, particularly if Trump's victory leads to a Republican sweep and more aggressive fiscal policy. However, a divided Congress might temper these expectations, potentially stabilizing mortgage rates and housing stocks in the coming months.


In conclusion, the surge in mortgage rates following Trump's victory has had a significant impact on the housing market, with housing stocks reacting negatively. As the election outcome remains uncertain, investors may continue to price in a higher risk premium, driving mortgage rates and Treasury yields higher. However, a divided Congress might help maintain fiscal responsibility and stabilize mortgage rates and housing stocks. The future of the housing market and mortgage rates will depend on the policies implemented by the incoming administration and the response of investors to those policies.