The dust is still settling, but I thought it’d be prudent to look at what might happen to mortgage rates now that the midterms have passed.
As many expected, it was a so-called “Blue Wave” with the Democrats taking control of both the House and the Senate.
This led to initial fears of an AI spending collapse, with many Dems seemingly against data centers. But stocks are rallying again this morning and bond yields are dropping.
The reason might be that there’s a perceived balance now with less expected government spending, fewer tax cuts, and reined-in AI spending.
Taken together, that could lead to lower mortgage rates over time, but the larger issue will still be the war with Iran.
Stocks Unexpectedly Surge, Bond Yields Drop
The Dow jumped over 1,000 points at the open, and the Nasdaq was up about 500 points as investors seemed to welcome the certainty of the midterms outcome and the prospect of gridlock.
Given the move back into stocks, you’d expect some serious pressure on bonds.
But yields are lower on the day as well as it seems everything is benefiting today.
The 10-year bond yield is hovering around 4.90%, building on momentum from the past month.
As such, mortgage rates should come down on the day, and could get a nice boost if MBS investors feel more confident in the new post-midterms environment.
The reason why is a Democrat-controlled Congress with a Republican president means we have a divided government.
That makes further large tax cuts and aggressive new spending much more difficult to pass.
Bonds like it because it means additional deficit expansion is contained, easing pressure on yields (interest rates).
Do Mortgage Rates Like a Divided Government?
In theory, they should. And history also backs it up.
When a single political party controls everything, the bond market tends to worry about big spending bills and/or tax cuts, which means more government borrowing and bond issuance.
When there’s more bond issuance, increased supply means yields must rise to attract more investors.
With Washington now split, new bills and spending packages become a lot harder to pass, which means less new debt for bond investors to absorb, easing pressure on yields.
Long story short, mortgage rates have one less thing to worry about; fiscal expansion.
In fact, four of the past five midterms since 1962 that flipped to divided control led to a median 10-year bond yield about 1.25% lower year-over-year.
Assuming this happens and mortgage rate spreads come in a bit too due to the increased certainty of gridlock, you could get a 30-year fixed sub-6% again.
There’s also the thought that AI buildout will slow, or at least not accelerate, with Dems more critical of data centers and increasing oversight.
However, there are other major drivers of mortgage rates that can carry more weight, such as the Iran war.
Dems Can Also Slow War Spending and Possibly Put an End to It
The other big issue is the ongoing Middle East conflict, which began at the end of February.
That’s really what led to markedly-higher mortgage rates this year, at the time sub-6% for the first time since 2022.
After the war broke out, the 30-year fixed climbed from as low as 5.875% to as high as 7.625%.
Yes, some of it may have been related to AI spending, but the war was the major catalyst that reversed the course of mortgage rates from falling to rising.
With the Dems in control, it’ll be harder for Trump to continue his war with Iran.
Democrats can slow or restrict war spending via a variety of means, such as refusing to appropriate new money for the conflict, or attaching restrictions to must-pass funding bills.
They can also create political and public pressure via new oversight, subpoenas, and hearings.
Taken together, that can make continuing or expanding the Iranian conflict more expensive and politically costly to Trump.
So far, oil prices are also down on the day, which is another tailwind for mortgage rates (it means lower inflation, which bonds like).
As I keep saying, if you want mortgage rates to move meaningfully lower, you’re rooting for an end to the war.
That’s really the biggest potential mover and what could get us nearer to those sweet sub-6% levels seen before it began.
So a divided government could lead to lower mortgage rates over time if these themes play out as expected.
But perhaps more importantly, for now, it could help keep them from going any higher.
Read on: Compare different mortgage rates fast with my mortgage rate calculator.
- What Happens to Mortgage Rates Post Midterms? - November 4, 2026
- Goldman Sachs Sees Mortgage Rates Falling to 6.4% in 2027 - November 3, 2026
- Mortgage Rates Edge Closer to a 6-Handle Ahead of Midterms and Jobs Report - November 2, 2026