Rates went up with news of Trump’s victory. The markets believe that a GOP controlled White House and congress will foster a more hawkish Fed (more willing to raise rates) and a tighter fiscal policy (less government spending and quantitative easing).
This contrasts with what we mentioned in previous blogs. It was thought that the uncertainty created by a Trump presidency would push rates down, as investors dislike uncertainty (and move out of stocks and into bonds).
Stock market futures did plummet last night with news of Trump’s victory. But, the “Trump crash” never materialized, and stocks recovered this morning. This is partly b/c of Trump’s victory speech that raised hopes that he will focus on improving the economy and not follow through with some of his extreme campaign positions.
In the shorter run, we can expect rates to remain where they are or to continue to edge higher, unless significant negative economic news surfaces. Longer term, rates are expected to rise, but we have seen this prediction dashed time and again. We are in a different world now, with much less ability to predict (see last night’s election).
As for mortgages overall, we can expect looser guidelines and controls, as a GOP controlled gov’t is expected to try to loosen the effects of Dodd Frank and back off the CFPB. They may also try to break up Fannie and Freddie which would further free up lending guidelines.
While we will not return to the irrational pre-meltdown lending guidelines, we will hopefully see more “make-sense” underwriting and fewer irrational demands, if institutions are less paranoid about extreme regulatory scrutiny.
Final Note: Today’s blog focuses on mortgages only, and is not an endorsement of Trump or any other candidate or policy. We realize that there are many other factors that can affect the economy overall, and therefore also significantly affect the mortgage and housing arenas.
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