Rising Interest Rates Could Further Slow Inventory And Keep Renters From Buying

November 21, 2016

When Donald Trump was elected president, prescient renters got chills running down their spines.

Business Insider reports that mortgage rates have spiked since the election, rising from 3.6 percent to nearly 4 percent. The jump can be traced like so: Trump’s plans for corporate tax cuts and big investments in infrastructure could trigger growth and inflation. Higher inflation led to a sell-off in bonds, which pushed up interest rates.

The site says that rising mortgage rates will most impact renters who want to buy, as borrowing will become more expensive. Also, existing homeowners may be more inclined to stay put with locked-in low rates, keeping more homes off the market.

From a macroeconomic perspective, rising rates are still "not necessarily a reason to throw in the towel on housing," said Tom Porcelli, the chief US economist at RBC Capital Markets. For one, it takes a while before the drop in mortgage applications shows up in home sales numbers. Also, if higher rates discourage some prospective buyers, that could be offset by a slowdown in the pace of house-price growth because of lower demand.

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