Mortgage Rates Rise After Election

Overview: This past week, investors reacted to election results, which negatively impacted mortgage markets. As a result, mortgage rates rose to their highest levels since early July, outweighing weaker labor market data.

Why Did Rates Rise? Investors view Republican policies as unfavorable for mortgage markets. Anticipated economic growth raises concerns about inflation, and proposed tariffs could further increase inflation. Additionally, higher deficit spending may require more bonds to be issued, leading to higher yields to attract buyers—directly impacting mortgage rates.

Employment Report: The Employment Report showed that only 12,000 jobs were added in October, much lower than the 100,000 expected. This was the smallest increase since December 2020. Job gains for previous months were also revised down by 112,000. Wage growth remained steady, with average hourly earnings up 4% from last year.

Mixed Economic Data: The Institute for Supply Management (ISM) released mixed reports. The ISM Services Index rose to 56, indicating strong growth in services. In contrast, the ISM Manufacturing Index was 46.5, signaling continued contraction in manufacturing. This highlights the ongoing strength of the service sector compared to manufacturing.

Takeaway: Investors are adjusting to the election results, anticipating policies that could boost growth but also drive inflation. Combined with mixed economic data, this has pushed mortgage rates higher. Monitoring these developments is key for making informed decisions.

Fun Fact: Did you know that mortgage rates can sometimes react more to investor sentiment than actual economic data? The perception of future economic changes, like inflation or government spending, can influence rates just as much as hard numbers.

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