Mortgage Predictions: What the Jan. 20 Presidential Inauguration Could Mean for Rates
Under normal circumstances, it’s nearly impossible to predict where mortgage rates will go. Now, with so much uncertainty in financial markets, mortgage interest rate More spikes and swings are likely, especially after the presidential inauguration on January 20.
Earlier this month, the average interest rate for a 30-year fixed mortgage jumps to over 7% And it hasn’t come down yet.
Several factors have been driving interest rates higher recently. Strong economic data downgrades Expectations for a Fed rate cutsending the 10-year Treasury yield, a key benchmark for home loan rates, soaring. The mortgage market is also rattled by worries about the incoming administration of Donald Trump. will cause inflation and increase government debt deficits.
Much will depend on the president-elect’s words and actions once he takes office in the coming weeks, he said Jacob ChannelSenior Economist at LendingTree. For example, if Trump declares an economic emergency to impose tariffs or start a war with Denmark, mortgage rates will move even higher.
“Unless the president-elect’s tone becomes more moderate and disciplined after taking office, volatility is expected to continue to be widespread,” the channel said.
After Trump takes office, the Federal Reserve will hold its first policy meeting of the year. Although economists believe the Fed will not Raise or lower interest rates On January 29, investors will be looking for any signals to inform their risk assessments and trading strategies, all of which could impact the direction of mortgage rates.
Mortgage Rate Volatility in 2025
According to the current situation, Mortgage rates drop sharply Reportedly unlikely before spring home buying season Valerie SandersCEO Strategist, National Association of Mortgage Brokers.
Only a sudden economic shock, such as a recession or a surge in oil prices, would cause interest rates to fall sharply. “A sharp change in direction is usually the result of some major event somewhere that upends financial markets,” he said. Keith Gumbingervice president of mortgage website HSH.com.
Still, the geopolitical outlook, job market and inflation data have the power to change mortgage forecasts.
Currently, in addition to daily fluctuations, mortgage interest rate Growth is expected to be around 7% in the coming months. Experts say mortgage rates could fall if inflation continues to cool and the Federal Reserve is able to cut rates by 0.25% twice this year. inches dropped nearly 6.25% final.
Federal Reserve Governor Christopher Waller said on Thursday he was optimistic about an easing in inflation, which would allow the central bank to Continue on the path of interest rate cuts In the first half of 2025, the central bank cut interest rates three times in 2024, and investors are now betting on another rate cut in June or July.
While the Fed affects the direction of overall borrowing rates, it Does not directly control the mortgage market. In fact, market forces often move in response to expectations of Fed policy moves, relying on economic data and forecasts to price their expectations for the bond market.
“Because the rise in bond yields is due to expectations of future events, if the narrative changes, bond yields may change,” he said. Wu KaraZillow senior economist.
Looking forward to the real estate market in 2025
Today’s unaffordable housing market The result of high mortgage rates chronic housing shortageexpensive housing prices and loss of purchasing power due to inflation.
🏠 Low housing inventory: A balanced housing market typically has five to six months of supply. The average volume in most markets today is about half that number. according to Freddie Macwe are still short of approximately 3.7 million housing units.
🏠 Increase your mortgage Rate: In early 2022, mortgage rates hit historic lows around 3%. Mortgage rates more than doubled as the Federal Reserve raised interest rates to curb inflation as it soared. Mortgage rates remain high through 2025, causing millions of potential buyers to exit the housing market.
🏠 Rate lock effect: Since most homeowners are Lock in your mortgage rate If it’s below 5%, they’re unwilling to give up lower mortgage rates and have no incentive to list their homes, leading to a lack of resale inventory.
🏠 High housing prices: Although demand for home purchases has been limited in recent years, home prices remain high due to a lack of inventory. The median home price in the United States is $429,963 Data from Redfin showed year-over-year growth of 5.4% in November.
🏠 Rapid inflation: Inflation means the cost of basic goods and services increases, thereby reducing purchasing power. It also affects mortgage rates: When inflation is high, lenders often raise interest rates on consumer loans to ensure profits.
What home buyers should know
Rushing is never a good idea buy a house Without knowing what you can afford, create a clear home buying budget. Here’s what experts recommend before buying a home:
💰 Build your credit score. Your credit score will help determine whether you qualify for a mortgage and what the interest rate will be. one credit score 740 or higher will help you qualify for lower rates.
💰 Save more down payment. bigger down payment Allows you to apply for a smaller mortgage and obtain a lower interest rate from the lender. If you can afford it, a down payment of at least 20% will also eliminate private mortgage insurance.
💰 Shop Mortgage Lenders. Comparing loan quotes from multiple mortgage lenders can help you Negotiate a better price. Experts recommend getting at least two to three loan estimates from different lenders.
💰Consider renting. choose Rent or buy a house It’s more than just comparing monthly rent to mortgage payments. Renting offers flexibility and lowers upfront costs, but buying allows you to build wealth and have more control over housing costs.
💰 Consider mortgage points. You can get a lower mortgage rate by buying mortgage pointseach point costs 1% of the total loan amount. One mortgage point is equivalent to a 0.25% decrease in the mortgage interest rate.
