What are some possible outcomes for mortgage rates after the elections?

Recently, there’s been significant upward pressure on mortgage rates despite a lower-than-expected October jobs report. This may not be a big surprise due to the impact of hurricanes and a Boeing strike.

This trend could be driven by the market’s expectation of a Trump win. There are two main reasons a Trump victory could increase mortgage rates: 1) Trump’s stated tariff policy could increase inflation, and 2) there is a stronger possibility of a red sweep, where one party has complete control of the government. In such a case, there would likely be fewer roadblocks for government spending, particularly if Republicans also lower taxes. This could lead to more bond issuance, resulting in higher yields, which correspond to increased mortgage rates and inflation.

Regarding the tariff concern, we can look back to 2019 when Trump initiated tariffs on China, which led to downward pressure on interest rates. As for the possibility of a red sweep, there’s only a 36% chance of Republicans winning Congress, according to Kalshi.

If Harris wins, investors view her as representing more of a status quo, which doesn’t organically push rates lower.

Many investors expect both Harris and Trump would issue more bonds, which, as mentioned earlier, could negatively impact mortgage rates.

In short, a Harris win could potentially lead to an immediate downward trend or maintain the status quo for mortgage rates, while a Trump win could place upward pressure on rates. However, in the long term, a Trump presidency could possibly be more favorable for rates.