As shocking as Donald Trump’s rise to political stardom has been, the exact opposite has been true on the Democratic side of the 2016 presidential ticket where things are unfolding mostly as expected. Hillary Clinton, long waiting her turn, is now officially the Democratic nominee for president.
Clinton’s nomination acceptance Thursday night was a historic moment in American politics. She’s the first woman ever to be a major party’s nominee. She’s also a former First Lady now 270 electoral votes away from becoming the 45th president.
But what does it all mean for mortgages and financial markets?
Last week, we looked at how GOP nominee Donald Trump might shake things up. In many ways Clinton is the opposite. Take a look:
- The CFPB. Perhaps the biggest difference between Clinton and Trump (or Democrats and Republicans) in our industry is what happens next with the Consumer Financial Protection Bureau. While a Trump presidency would advance GOP ambitions to cut funding and possibly even shutter the agency, Clinton and her party have been clear they intend to strengthen and expand restrictions on Wall Street banks and give more assistance and protections to consumers. That means a Clinton presidency will likely bring about CFPB changes meant to expand its influence rather than reduce it.
- No surprises here. Clinton is also the anti-Trump in basic makeup. She is a policy wonk with decades of public service track record for us to judge (like it or not). Trump, of course, is an unpredictable newcomer. Wall Street hates surprises. So, expect a Clinton win to be received well on Wall Street. Further, while Clinton has talked tougher this year about regulating banks and financial markets, her campaign is well-financed by Wall Street banks and she is seen as the more status quo candidate.
- Domestic focus emphasized. Though a former secretary of state and no stranger to the world stage, Clinton seems poised to put a larger focus on domestic issues than Trump. Gun control, health care, education, child care and women’s equality are all mentioned frequently by the Clinton campaign. As for housing, the 2016 Democratic platform has eased away from President Barack Obama’s calls for winding down Fannie Mae and Freddie Mac. The party has also called for expanding programs to make housing accessible to low- to moderate-income families, especially as the homebuyers of the future are expected to be ethnic minorities who have struggled in the past to afford homes.
What about the Fed’s interest rate decision?
Yes, the Federal Open Market Committee voted this week to leave interest rates untouched once again. It was the biggest item watched on Wall Street in a week full of data releases. The FOMC signaled it will continue to take a dovish stance on rates. The committee acknowledged moderate economic growth in the U.S. But persistent headaches around the globe have scuttled predictions of as many as four rate hikes in 2016. So far, we’ve seen no rate increases this year after the December 2015 increase of 25 basis points, after almost seven years at zero. Odds of one more rate hike before the end of the year are about 50-50 at this point. Unless stability suddenly returns to global markets, there’s a chance we’ll finish the year without any more rate increases.
What does this mean for mortgages?
Freddie Mac’s weekly survey shows mortgage rates ticked up just 3 basis points on average this week. So, we continue to sit in a historically low rate environment with little fuel to push rates higher quickly. The 10-Year Treasury yield, a leading indicator on mortgage rates, dropped nine basis points this week to 1.48% as bond prices ticked higher.
This continues to be a solid refinancing environment for borrowers, especially those who locked in fixed rates above 4 percent.