Mortgage Rates Rise Near 7% on Eve of Second Trump Term

Even before his return to the White House, President-elect Donald Trump's announced policies on taxes, spending and tariffs are having a chilling effect on people hoping to buy or sell homes.

The average rate on the 30-year mortgage, the most popular home loan in the United States, has risen to 6.93%, The New York Times reports, the highest since early July.

Mortgage rates tend to track the yield on 10-year Treasury bonds, which has jumped in response to a string of strong economic data, persistent inflation and a potential rise in debt and deficits stemming from policies proposed by the incoming Trump administration.

Last week, the 10-year Treasury yield extended its months-long rise, fueled by a range of factors including data showing the U.S. services sector expanded in December and President-elect Donald Trump reasserting his plans for tariffs on a broad range of imported goods, which many economists said would be inflationary. On Wednesday, the 10-year yield briefly rose above 4.7%, hitting its highest level since April.

Last year, the Federal Reserve began to cut interest rates from the decades-long highs they'd reached as officials tried to rein in stubborn inflation. The central bank cut rates three times last year, but it signaled only two reductions this year as inflation lingers.

Mortgage rates, paradoxically, have been climbing even as the Fed has cut the short-term rate it controls. That divergence is largely because longer-term rates set by the market, including mortgages, reflect investors’ expectations of future economic conditions, rather than the Fed’s current decisions.

Jitters about inflation and an “unsustainable” path of government borrowing have contributed to the surge in long-term interest rates, taking mortgage rates along for the ride, says Greg McBride, the chief financial analyst at Bankrate. He expects mortgage rates to end 2025 around 6.5%. Elevated levels of government borrowing — and the ballooning deficits that come with it — will likely accompany any tax cuts promised by the incoming Trump administration.

The housing market has been stuck for years, with mortgage rates rising rapidly in 2022 and 2023, peaking close to 8%. Many homeowners have felt trapped by the low rates they secured early in the pandemic, when the average 30-year rate was around 3%, making them reluctant to list their homes for sale. The resulting lack of supply, in turn, has kept prices high, making it even more of a challenge for buyers facing spiraling mortgage rates. It all adds up to a perfectly dreadful storm — with no relief in sight.

However, there are signs that potential buyers and sellers are beginning to accept the reality that interest rates are not going to come down, according to Heather Mahmood-Corley, a real estate agent at Redfin in Phoenix. One of her clients recently told her she was prepared to buy a house within three to six months, no matter the borrowing costs — a sentiment Ms. Mahmood-Corley says she had been hearing more often.

“A lot of people were waiting to see what happens with the new administration,” Ms. Mahmood-Corley says. “But I’ve also had a lot of buyers who are fine with these interest rates, and realize that in 2025, they’re not going to go down like they’d hoped.”

Welcome to Trump II.