Well, President Donald Trump is officially back in office after the long-awaited inauguration took place today in Washington DC
He was sworn in as the 47th President of the United States to go along with his 45th.
After what felt like a long wait between early November and today, we finally get to find out what he will take.
Like most politicians, there is always a lot of talk, but it doesn’t always result in action.
For the purposes of this website (and this article), my focus is on the direction of mortgage rates, which will be driven by both political and economic conditions.
Mortgage rates are above 7% to start Trump’s second term
| 30-year fixed interest rate | First semester | Second semester |
| Start | 4.25% | 7.08% |
| End | 2.85% | ????? |
| High | 5.05% | ????? |
| Low | 2.76% | ????? |
When it comes to mortgage interest rates, to say that things are different this time around would be a huge understatement.
Of course, Trump is talking about much of the same thing eight years later, namely China.
But for reference, the 30-year fix was at 4.25% when Trump first took office as the 45th president back on January 20, 2017.
And was in the mid-3% when he unexpectedly won the presidential election in November 2016.
Considering the average interest rate is closer to 7.125% today (I use eighths just like the mortgage lenders do), that’s a whole different ballpark.
Prices are nearly double what they were then, and even more than double the lows seen during this first tenure in the Oval Office.
Mortgage rates hit record lows during Trump’s first term
Speaking of, mortgage rates hit a record low of 2.65% in January 2021 just before Trump left office, per weekly Freddie Mac data.
Of course, it was also their lowest point during his first four years in the White House.
The reason rates got so low was because of the pandemic, which led to another round of quantitative easing (QE).
QE is the program where the Fed bought trillions of mortgage-backed securities (MBS), thereby lowering mortgage rates.
This resulted in record low mortgage rates, which officially reached their lowest point in history in the week ending January 7, 2021.
The chances of another round of QE seem pretty bleak at this point, although I suppose anything is possible…
But prices rose to a high of 5.05% midway through late 2018
Things weren’t always peachy for mortgage rates under Trump.
I looked at daily mortgage rate data from Mortgage News Daily and found that mortgage rates hit a high of 5.05% during Trump’s first term.
And you have to remember that a 5% rate back then felt like the end of the world. Today it would be a blessing. Funny how it works.
At least this took place in November 2018, after bond yields started rising as government spending picked up and the economy looked a little too hot.
Government spending combined with tax cuts led to increased issuance of government bonds and was accompanied by more Fed rate hikes (policy tightening).
The Fed justified their hikes based on very low unemployment and rising wages, an early sign that inflation could rear its ugly head.
At the time, we had no idea how bad inflation would get. Nor did we know that a global pandemic would unfold, leading to even more stimulus and government spending.
In any case, the rise in interest rates turned out to be short-lived after the Fed began cutting interest rates in 2019, the first time they had done so since 2008 (the housing crisis).
It was driven by uncertainty about the direction and strength of the economy and trade tensions with China (sound familiar?).
What should we expect this time?
Well, I already wrote a whole post on mortgage rates in Trump’s second term, and the long and short of it comes down to what he does versus what he says.
And also what the economy does over the next four years, which he may not have much control over.
The other part is that, like his first election victory, prices rose in anticipation of what he might do.
But this time they were up about 1% since mid-September, despite him being the front-runner and the expected winner.
In 2016, they also jumped about 75 basis points (0.75%), but only because he wasn’t the expected winner.
So there is an argument that all the fears of what might happen under Trump are thoroughly baked in this day and age.
That means it could relax, similar to what happened in 2017. But we also have wildcards to consider, like the pandemic, which may have just pushed back the inevitable. Ironically for Trump’s second term.
I wouldn’t be surprised if rates breathe a sign of relief now that he’s finally in office. But I also expect a lot of swings when he starts acting instead of just talking.
There are similarities, like the trade wars and the fear of public spending. But we also start from a very different place. The highest mortgage rates in 25 years versus the lowest when he won in 2016.
As always, be ready for opportunities like any year, and watch out for periods when the price trend is not your friend.
Read on: Mortgage Predictions in 2025
