Changing Rates and Regulations Could Alter the Nation’s Mortgage Market

According to the Wall Street Journal, the recent Trump victory is likely to alter the home lending landscape. Interest rates are the most immediate concern. Trump’s victory has caused bond yields to surge, which in turn could lead to rising mortgage rates. In the two days following the election, the 30-year fixed-rate conforming mortgage jumped a quarter point to 3.87 percent. While still low by historical standards, mortgage rates could rise quickly depending on where the 10-year Treasury heads. Stu Feldstein of SMR Research Corp., a mortgage-research firm, said, “The ultimate problem is the impact of rising rates on home values …. We’re back into a bubble condition in part because of low rates that have enabled people to buy houses much more expensive than their incomes could afford.” The speed and size of potential rate increases will depend in part on Mr. Trump’s fiscal policies and the effect they have on inflation.

A second point of interest to lenders is whether a more bank-friendly regulatory environment is on the way. Regarding Dodd-Frank, Mr. Trump said during an interview with The Wall Street Journal, “We have to get rid of it or make it smaller.” But a looser lending environment could result in more borrowers getting approved, thereby raising the risk of reduced performance.

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