Fra Noi Embrace Your Inner Italian
Mortgage rates jumped by more than half a percent in the wake of the win by President-Elect Donald Trump.
On the night of the election, as it became more and more apparent that Mr. Trump was going to win, the stock futures, an indicator of where the Dow Jones might open the next, was down 800 points, which indicated that rates would also drop.
When the market opened the day after the election, the market started out flat and ended the day up over 250 points. This was almost a 1,100 swing relative to the projections.
Mortgage and treasury rates jumped that day by almost ¼ percent. Why? It is perceived that the new administration will be creating new jobs through infrastructure spending, which will in turn create inflation. Now a little inflation is not only good, but needed in order to bring our markets back into alignment. But too much will hurt bonds, which will increase the yield, bringing up the rate.
The other concern is that the current administration will add to the $19 trillion in debt that the U.S. now owes, which will also make borrowing more expensive.
From what I can see, the market has overreacted to the results of the election. This could also be the beginning of the end of low rates. Do I think that rates are going to skyrocket into the 6 to 7 percent range? No, I do not, but I do think that the 30-year fixed will be in the mid-to-upper 4 percent range for 2017.
This is just an estimate because it will all depend on what the new administration does and how the market perceives it.
To contact me, call 773-557-1000 ext. 15, e-mail ron@ronmortgage.com or visit http://www.ronmortgage.com.
