Current 30 yr fixed is 4.35% for Jumbo ! Trump removes many financial controls on lenders. Bank stocks skyrocketed 20% after his win. This means banks are not going to reduce loan rates, keep on improving the profit margin !
Trump is not the president yet, the rate increase is only a speculation on future inflation and economy growth.
I believe the yield spread is depending on competitions. Deregulation should reduce the loan cost, not increase it. The reason for the mortgage rate increase is not better profit margin. Actually higher rate reduces loan volume and reduces banks profit.
Rate will increase if the economy grows and inflation rises. Mortgage rate may go down some when Trump takes over the job. It takes time for him to get things done, and it won’t be a straight arrow, there will be many bumps and some panics.
Market was expecting a lukewarm economy under Hillary, but trump gave a big surprise.
Why on earth do you think that’s how banks and mortgages work?
Banks play major role on economy. Otherwise, we would not have end up in downturns. Every downturn directly puts pressure on banks that affects economy. Every downturn results many banks filing bankruptcy.
https://www.fdic.gov/bank/individual/failed/banklist.html
Banks are biggest services providers for mortgage. They were constrained by various rules to comply, but Trump is letting them to run free. They always apply MBS+mark up = our mortgage. Even though last year FED rate hiked, lenders kept the mortgage low. Now, both MBS secondary buyers and service providers (bank) are going free ride. Bank can take higher risk assets freely and increase the bottom line. Mortgage may fluctuate, but will gradually go up next year.
Market is not going 20% up with surprise, but pricing in Trump Tax cut and other initiatives.
Yes, it is speculative on stock market, but mortgage (MBS+others) are not speculative.
Lookup a chart of 10-year treasury yields. You’ll see why the mortgage rate moves the way it does. The fed rate is just one part of the equation.
Now, I get your point. Yes, Mortgage follows 10-year treasury yields/bonds. Mortgage gets into fixed return, like a bond, for lender or the MBS buyer. But, this is history/reference and I do not deny mortgage follows 10-year treasury yields.
FED rate changes base line bank to bank lending rates. When it hikes, everything has to hike or someone has to absorb the loss. Since most of the lenders or secondary market providers are running with thin margin, practically raising the rates are easier than absorbing the loss.
Strictly speaking, it is MBS+Markup that results our mortgage !