Mortgage Rates get Trumped Up

In the wake of a Trump victory and a looming celebrity spearheaded administration, there is a lot of talk about the markets and the elections impact on the economy. Much of the dominant news right after the election was called early last Wednesday was centered around the significant drop experienced by DOW futures. Much of the initial loss was recovered by later in the day on Wednesday as the market adjusted to this shock. As the news cycle continued over the week, talk shifted from the stock market to speculation on Trump's policies, which aren't as fleshed out or as consistent as previous president-elects. However, unless you work in the housing market or are looking for a new home, you might have missed the fact that mortgage rates have jumped up to 4%.

This may not sound like a big jump, but a similar jump only recently occurred in the 2013 taper tantrum (where U.S. treasury yields, and thus mortgage rates, surged due to the announcement that the FED would begin shrinking its magnitude of monetary expansionary policy). Other than that 2013 event, the most recent similar jump occurred in 1987. Often times, market shocks that bring about uncertainty (like Brexit) will drive mortgage rates down as investors flock from equity markets to bond markets in a "flight to safety" that drives prices down. When we do see shocks that provide upward pressure in the form of a knee-jerk market reaction, the market typically adjusts back down within a week or so. However, as we sit almost a week after the Trump election, rates are still trending upwards and we could be ending our low-rate era. For a graduating senior who will be looking to buy a home in the next decade, and who is looking for work in the mortgage industry, this uncertainty is unsettling. 

http://www.mortgagenewsdaily.com/consumer_rates/678888.aspx