“Trump Thump” – Mortgage Rates Jump 0.500% or More Post Election
The election is now over and the dust has settled. As painful as it might be to accept, a trend described by others as the “Trump Thump” means we may now have to get used to 30-year fixed conforming loan rates at or above 4.0%.
Prior to the election, pundits had clearly agreed on the idea that the markets “built in” the prospect of a Clinton victory, and – in the unlikely event that Trump won – this surprise victory would mean an improvement in the bond market because of the uncertainty Trump would bring to the table. Well, so much for that idea.
Economic experts maintain that Trump’s economic policies will boost spending and business, as well as bring inflation (all of which leads to lower bond prices and higher mortgage rates). Interesting to me how quickly everything turned in the direction. Was there not enough time spent analyzing the impact of a Trump victory? Did this catch the markets unprepared?According to a recent article by Money writer, Taylor Tepper, markets indicate there’s a 75% chance that the Fed raises short-term rates modestly when policy makers meet in mid-December. Here’s a more in-depth analysis on what President-elect Trump means for interest rates in Tepper’s article: President Trump Interest Rates Federal Reserve. CNBC’s Diana Olick weighs in on the mortgage rate crisis: watch video. 10-year treasury yields have also spiked in the days since Trump’s election, and something to keep in mind with that is: Don’t panic. This sudden rise isn’t likely to continue, at least, not because of the Trump presidency. “Rates tend to move very sharply in short periods of time and very little in prolonged periods of time,” said Greg McBride, chief financial analyst for Bankrate. “It’s not something that I think continues.” So, my advice to those who are anxious about mortgage rates, know that this is a cycle… and as far as rates are concerned, nothing is on the horizon that would suggest waiting for an improvement in rates. Either way, expect volatility and a continuing upward trend in rates.
Retirement assets to be considered in qualifying for conventional loans under new Fannie Mae & Freddie Mac policies. Should add flexibility for retired individuals wanting a conventional loan.
One of the unfortunate outcomes of the economic crisis since 2008 has been perfectly well-qualified borrowers that cannot get a loan under the very strict underwriting guidelines we have all been living with the past five years. Finally, policy changes at Fannie Mae and Freddie Mac may help those with substantial retirement assets qualify for low rate conventional loans by including in income eligibility factors such as IRA, 401(k) and other retirement assets, to supplement existing fixed income such as Social Security. I can think of a number of clients over the past five years that have been frustrated at their inability to qualify for a mortgage when they had hundreds of thousands, and sometimes over a million, dollars in their retirement funds. While Fannie Mae and Freddie Mac can come out with new underwriting guidelines, it will be important to get investors on board to accept these new policies and provide the dollars necessary to fund these loans. The early success of the HARP refinance program for borrowers with less than 20% equity in their homes was torpedoed by a lack of investor appetite for these riskier loans. I would not anticipate the same kinds of issues with this new program, however. This is an exciting change that would return some flexibility to those making a transition in retirement to a new home. If you would like to talk with a mortgage advisor who thinks long-term and strategically about your financial investments including your liabilities – please give me a call.