The 2024election has come and gone, and for Donald Trump and his transition team the work creating a new administration continues. And the press follows every event. Lenders and their clients are primarily focused on regulatory and economic developments. As for economic policy… well, we saw evidence of the future of that in the last few days with the introduction of tariffs against Canada, Mexico, and (to some extent) China.

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The expectations for lower tax rates and unwinding some/many of the regulations put on various industries during the Biden Administration may occur. Whether those will come to pass and their long-term effect on the economy will certainly impact mortgage rates, however Orion wants our broker clients to know that there is tremendous lag time between initiating policy, getting anything through the legislative process, implementing the policy and then the impact that any policy changes may have on the economy.

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Many were surprised by rates shooting higher in the days after the election. Markets, and people, don’t like uncertainty, and the stock and bond markets are trading off Mr. Trump’s previously stated economic policy proposals. Investors feel the new administration will be more business friendly with tax cuts, deregulation, and higher defense spending. But bond prices have dropped, moving interest rates higher, because then President-elect Trump promised to impose tariffs and implement other actions which could increase the Federal deficit, and ultimately drive up inflation.

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Recall that inflation is the rising prices of goods and services over time. Rising prices erode the purchasing power of a bond’s fixed future interest payment. It is still expected that the Federal Reserve’s Open Market Committee will leave short term rates alone for some months into the future. But the interest rate movement that has occurred since the election represents the market’s belief that President-elect Trump’s policies will result in inflation.

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Also recall that a tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and policy that taxes foreign products to encourage or safeguard domestic industry. And whether it is lumber from Canada, or avocados from Mexico, if the average U.S. consumer is paying more for items, that is inflationary.

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But keep things in perspective! The average interest rate on a 30-year loan over the past 38 years was approximately 7 percent, about where we are now. And Orion’s AEs have some very good products to help blunt the impact of interest rates for any of your clients financing a home or refinancing one. Ask us!