Will Trump’s Policies Keep Mortgage Rates High in 2025? Here’s What You Need to Know
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How Trump’s Economic Policies Could Affect Mortgage Rates in 2025
Donald Trump has promised to lower costs for Americans as part of his economic agenda, but his proposed policies may have unintended consequences for the housing market. With mortgage rates already near 20-year highs and home prices still elevated, potential buyers face an uphill battle.
Let’s break down what Trump’s plans could mean for mortgage rates and affordability in 2025.
Why Are Mortgage Rates So High?
Despite two Federal Reserve rate cuts in late 2024, mortgage rates remain stubbornly high, sitting between 6% and 7%. This is because mortgage rates depend on more than just the Fed’s benchmark rate. Factors like the U.S. economy’s strength and changes in the yield on the 10-year Treasury bond also play a role.
After Trump’s re-election in November, the 10-year Treasury bond yield surged due to concerns about his policies, including steep tariffs, tax cuts, and stricter immigration enforcement. These changes could drive inflation higher, which often leads to higher mortgage rates.
Inflation and Tariffs: A Key Concern
One of Trump’s proposals includes a 25% tariff on imports from Mexico and Canada and a 10% tariff on goods from China. According to experts, these tariffs could raise inflation by nearly 1 percentage point.
Higher inflation could force the Federal Reserve to slow or even pause rate cuts, making it harder for mortgage rates to drop. For instance, if inflation climbs, borrowing costs rise for everyone—including homebuyers.
How High Could Mortgage Rates Go?
Housing experts predict mortgage rates will hover around 6.5% for much of 2025. However, if Trump’s policies drive inflation higher than expected, rates could creep closer to 7%.
For example, if you’re buying a home with a $400,000 mortgage at 7%, your monthly payment could be around $2,661. At 6.5%, that payment drops to $2,528—saving you over $1,500 per year.
Housing Affordability: A Growing Challenge
High home prices and mortgage rates are squeezing many buyers out of the market. In 2024, first-time buyers made up only 24% of the market—the lowest level since 1981. The median U.S. home price remains high at $420,000, despite a slight dip from the previous year.
Trump’s policies, such as tax cuts and infrastructure investments, may stimulate parts of the economy, but they could also increase the federal deficit. If this happens, the government might issue more bonds, pushing yields—and mortgage rates—even higher.
The Wealth Gap Between Homeowners and Renters
Homeownership remains one of the most effective ways to build wealth. The Federal Reserve found that homeowners had a median net worth of $396,200 in 2022, compared to just $10,400 for renters.
Even if rates remain high, buying a home can still make financial sense over the long term. For example, starting with a modest home and building equity could pave the way to upgrade later.
Looking Ahead: What Should Buyers Do?
While Trump’s policies could keep mortgage rates elevated, home prices are expected to remain stable in 2025. Buyers should focus on long-term goals, create a solid budget, and explore government incentives for first-time buyers.
Example for Ontario Buyers
Consider an Ontario couple planning to buy their first home with a $500,000 mortgage. At a 6.5% interest rate, their monthly payment would be approximately $3,160. With some careful budgeting and potentially taking advantage of programs like the First-Time Home Buyer Incentive, they could achieve their dream of homeownership.
If you’re feeling uncertain about navigating today’s challenging housing market, I’m here to help! Contact me to discuss your mortgage options and create a plan that works for your goals. Use this link or simply call us at +1 (647) 554-2718 or text us at the same number at +1 (647) 554-2718.
Disclaimer
This blog post is for informational purposes only and does not constitute financial or legal advice. Mortgage rates and economic policies are subject to change, so it’s essential to consult a qualified professional before making any decisions.
