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Higher mortgage rates that many expected in Trump era haven’t materialized

Freddie Mac says the benchmark 30-year fixed-rate mortgage dipped to 3.89 percent last week.
Freddie Mac says the benchmark 30-year fixed-rate mortgage dipped to 3.89 percent last week.Associated Press

Following Donald Trump’s election in November, mortgage rates jumped above 4 percent, after months of lingering around 3.5 percent. By the end of the year, a 30-year fixed-rate loan was going for about 4.3 percent. Some economists said it signaled the end of the historically low borrowing rates of the post-recession housing market.

They were wrong.

Instead of slowly and steadily escalating since Trump’s election, rates have ebbed and flowed in a relatively narrow range, with the benchmark 30-year fixed-rate dipping to 3.89 percent last week, according to the latest survey from the mortgage finance company Freddie Mac.


“In the months after the election there was an expectation the Trump administration would be able to enact tax cuts and infrastructure spending,” said Aaron Terrazas, senior economist at the real estate website Zillow. “If they had done that, it would have boosted growth, which would have made the [Federal Reserve] more confident in raising interest rates. But the growth prospects are slower than expected.”

The turmoil that has marked the Trump presidency so far — including the firing of former FBI director James Comey, the president’s tweets regarding North Korea, and his remarks on the violence in Charlottesville, Va. — have “spooked markets and caused investors to put money into safe markets, which pushed mortgage rates down,” Terrazas said.

That’s a bit of good news for homeowners who have yet to refinance and for potential home buyers, who can still lock in lower rates. The bad news, of course, is that many are being forced to borrow more money to be competitive in a real estate market plagued by low supply and record high prices.

The median price for a single-family home in Greater Boston’s red-hot market reached a record $615,000 in June, traditionally one of the busiest months for real estate activity. Statewide, the median price exceeded $400,000 for the first time.


Meanwhile, inventory was at the lowest levels since at least 2004.

“People are well qualified; people are very interested in purchasing a home, but there’s not a sufficient supply of homes to purchase,” said Paul Yorkis, president of the Massachusetts Association of Realtors, who also operates Patriot Real Estate in Medway. “The inventory has gone down over the past, basically, three years . . . If you don’t have something to buy, why would interest rates go up?”

Although Federal Reserve officials have raised interest rates twice this year, investors don’t anticipate another hike to come out of the Fed’s September or even December meetings, Terrazas said, especially with inflation remaining in check. But, he added, the Fed is under pressure to raise rates, partly because unemployment is low. The US and Massachusetts jobless rates are both at 4.3 percent.

“Historically, mortgage rates have been between 6 percent and 8 percent when unemployment rates have been this low,” he said.

Rate increases could eventually soften home prices in markets like Boston and San Francisco, “where buyers are overextended,” Terrazas said. “But it could also mean that some sellers would be unwilling to sell in that market. That’s a risk, as well.”

Katheleen Conti can be reached at kconti@globe.com. Follow her on Twitter @GlobeKConti.