Donald Trump cruised to victory in Tuesday’s election, in which inflation and the high cost of living played a major role.

Trump has promised to lower mortgage rates throughout the campaign as voters across the country express frustration with the high cost of homeownership. Presidents don’t set mortgage rates, but their policies can change interest rates, and much of that influence comes through Treasury yields.

Treasury yields rose Wednesday in response to Trump’s victory. The yield on the 10-year Treasury note rose nearly 20 basis points to 4.48%, its highest level since the beginning of July. Yields have risen steadily over the past month and a half as uncertainty around the election has increased and Wall Street has tempered expectations for aggressive Fed rate cuts.

What to Expect from Mortgage Interests?

A rise in Treasury yields on Wednesday will likely push mortgage rates higher in the near term, but they are unlikely to return to recent highs, experts say.

“We should expect mortgage rates to continue rising in the coming weeks based on the trend in post-election yields,” Realtor.com senior economist Ralph McLaughlin wrote in a note Wednesday. “The good news is that we still expect the long-term trend in interest rates to be downward as the fight against inflation caused by the pandemic comes to an end.”

Higher yields, a reflection of the market’s expectation that Trump’s second term will bring stronger growth and higher inflation, could have a long-term impact on interest rates.

“While we expect mortgage interest rates to stabilize by the end of the year, they will likely be higher than markets expected ahead of election week,” McLaughlin said.

The average 30-year mortgage rate was 6.72% last week, according to Freddie Mac. This is lower than the most recent peak of 7.79% in October 2023, but higher than 6.08% the week after the Federal Reserve cut its benchmark interest rate. For the first time since 2020.

What Does Trump’s Victory Mean for Fed Rate Cuts?

Trump’s victory cast further doubt on the pace and depth of further rate cuts. The overwhelming majority of market participants still maintain this expectation Fed will lower interest rates It rose 25 basis points at the end of a two-day policy meeting on Thursday, but the chances of policymakers making another rate cut in December rose to nearly 30% on Wednesday.

Economists at Nomura raised their forecast for the final fed funds rate, the level at which policy rates are neither restrictive nor accommodative, from 3.125% to 3.625%. Economic impact of Trump’s policy proposals. The Fed funds rate is currently in the 4.75%-5.00% range.

Trump promised an implementation recipe Economists say a move as high as 20% on all U.S. imports would raise prices for both importers and consumers. Nomura analysts don’t think Trump’s tariffs will go that far, but they still expect import duties to rise from the average rate of 2.5-3% today to 11-12% in 2026. They estimate this will push inflation to 3.1%. 2.7% in 2025 and 2026; their previous estimates were 2.3% and 2.1% respectively.

“Higher tariffs should lead to stagflation, weighing on personal consumption and business investment,” they wrote. “The inflation shock from tariffs will likely lead to fewer Fed cuts and higher borrowing costs.”

Why A Bigger Deficit Could Mean Higher Rates

Trump’s reelection also recalibrated Wall Street’s long-term expectations for federal debt, another key determinant of Treasury prices and yields.

Trump has promised to extend provisions of the Tax Cuts and Jobs Act of 2017 that are set to expire next year. Researchers at Oxford Economics predict Trump’s tax plans will change Increasing the federal budget deficit $3 trillion between 2026 and 2033.

“The federal budget is already on an unsustainable path, but federal fiscal conditions will worsen based on our previous baseline assumption,” researchers wrote in a note Wednesday.

From a market perspective, America’s bubble national debt It is a responsibility. The risk posed by a larger budget deficit could force investors to demand higher returns on Treasury debt, putting upward pressure on yields and the interest rates they support.