U.S. mortgage rates near 7%; tens of thousands of dollars added to 30-year payments since the war
The Wall Street Journal reported on Sept. 18 that ahead of the U.S. midterms, nearly everything — from buying a home to filling up a car — costs more than it did a week earlier. Indeed, last month's consumer price index rose 3.4% from August of last year, far above the Fed's 2.0% target. Average hourly earnings grew just 3.1% over the same period, trailing inflation for a fifth straight month.
According to government-sponsored mortgage company Freddie Mac, the average rate on a 30-year fixed mortgage came in at 6.95% this week, up 0.19 percentage point from the prior week. That marked a fourth consecutive weekly increase and the largest weekly jump in 16 months. It was also the highest level since January of last year, when Trump returned to power.
As recently as Feb. 27 — the day before the United States and Israel struck Iran — the U.S. mortgage rate stood at just 5.98%. It has climbed steeply since then on rising crude prices, broadening inflation and concerns over mounting federal debt. In practical terms, Americans buying the same house now owe tens of thousands of dollars more over a 30-year mortgage than they would have seven months ago.
The outlook for rates is hardly encouraging. At its Sept. 15-16 Federal Open Market Committee meeting, the Fed abruptly raised its benchmark rate for the first time in three years and two months. In the dot plot within the Summary of Economic Projections — the quarterly chart of policymakers' rate forecasts — the 18 Fed officials other than Chair Kevin Warsh put the median year-end rate at 4.125%, signaling one more increase could come this year. According to CME FedWatch, the federal funds futures market on Sept. 18 priced a 46.0% probability of a 0.25-percentage-point increase by year-end and a 44.1% chance of a 0.50-point increase — an overall 90.1% probability of at least one more hike this year.
The Fed's tightening stance could, of course, be read as a signal of long-term inflation control and help stabilize market rates that have already surged. Markets remain skeptical for now. The benchmark 10-year Treasury yield, which fell on Oct. 17 immediately after the FOMC meeting, rebounded on Oct. 18 to top 5%. The policy-sensitive two-year yield and the 30-year yield, a reference for U.S. mortgages, rose 0.0662 percentage point and 0.0346 point to 4.7560% and 5.3310%, respectively. At least through the midterms, ordinary borrowers are likely to feel high rates firsthand.
Diesel, which feeds into all prices, hits a record $6.40 a gallon; sentiment doesn't show up in macro data
Fuel prices soaring since the Middle East war are also moving voters. The U.S. national average diesel price hit a record $6.40 a gallon on Oct. 17, heightening alarm inside the Trump administration. That is more than 70% above the $3.71 of a year earlier. According to AAA, the average retail diesel price reached $6.06 a gallon on Oct. 11, topping $6 for the first time ever. It has since risen more than 30 cents in less than a week.
Because diesel fuels the trucks that form the backbone of U.S. logistics, it can affect the price of every good. According to the Associated Press, the Independent Grocers Alliance, which represents 7,500 supermarkets worldwide, estimates that fuel accounts for 15% to 30% of grocery prices. Amazon, the largest U.S. e-commerce company, began charging some sellers a 3.5% fuel surcharge after the war began. FedEx, UPS and the U.S. Postal Service are also levying extra fees on some parcels. Diesel is additionally the main energy source for farm machinery, fishing vessels, heating, power generation and heavy construction equipment.
Bloomberg said the issue "could become important in Maine, which has the highest share of households using home heating oil, and in farm states such as Ohio, Kansas and Iowa ahead of harvest." Maine, Ohio and Iowa are among the battlegrounds in Senate races. The Journal also said diesel prices could rise further as fall harvest boosts fuel demand on U.S. farms and heating-oil furnaces fire up across the Northeast, where winter arrives early.
According to the Journal on Oct. 17, Republican Rep. Tim Burchett of Tennessee introduced a bill on Oct. 16 that would temporarily ban diesel exports through January. The paper also reported that Senate Majority Leader John Thune of South Dakota signaled openness to considering a diesel export ban. Interior Secretary Doug Burgum, who also chairs the White House National Energy Dominance Council, said at a Group of 20 ministerial event in Houston on Oct. 14 that an export ban is "not under consideration at this time," but added, "if we judge it could lower prices, we'll look at it."
Global oil prices have not fallen below $100 a barrel amid a string of events including Ukrainian strikes on Russian refineries, the pro-Iran Houthi rebels' control of waters near the Red Sea and an attack on Saudi crude shipping facilities. Prices did slip for three straight sessions from Oct. 16 to 18 on hopes that Saudi Arabia's East-West Pipeline, an alternative crude export route, could be repaired relatively quickly. Still, as of Oct. 18, November Brent on London's ICE Futures exchange and October West Texas Intermediate on the New York Mercantile Exchange stood at $103.87 and $100.30 a barrel, respectively. Shipping data showed just four commodity carriers transited the Strait of Hormuz on Oct. 17, far below the 16-vessel average of the past 10 days.
This deterioration in consumer sentiment is a dimension not captured in the macro data published by the Trump administration and the Fed. Right after the Oct. 16 FOMC meeting, the Fed raised its real GDP growth forecasts for this year and next by 0.1 percentage point each from June, to 2.3% and 2.4%. It put this year's unemployment rate at 4.1%, 0.2 point below its June projection. According to the Fed, U.S. household net worth reached $186 trillion in the second quarter, up $26 trillion from the end of 2024. August retail sales released by the Commerce Department on Oct. 16 rose 1.2% from July, beating the 0.8% consensus compiled by Dow Jones. Warsh said at his post-FOMC news conference: "We made the decision to raise rates at a time when the U.S. economy appears to be strengthening." He added that "indicators such as new hiring, private incomes and business capital investment have improved in recent months."
"Republicans favored in Senate, Democrats in House; backlash against AI and data centers also a factor"
Jang Sung-kwan, head of U.S. strategy at the American political consulting firm D&A Advisory, also said at an Oct. 14 briefing for Korean correspondents hosted by the Korean Consulate General in New York that voter sentiment about the economy, rather than headline data, will decide the election. "The conventional wisdom in the United States is that voters' minds are already made up six months before an election," Jang said. "The number one factor is unquestionably how the economy feels." He predicted Americans would respond more sensitively to prices they experience directly and to credit-card delinquency rates than to economic statistics. "In the U.S., there has traditionally been a strong perception that the conservative Republican Party is more trustworthy on the economy and security, but a recent Fox News poll showed voters now trust Democrats more on the economy and taxes," Jang said. "Trump's pledge to give every American adult a $5,000 dividend appears to reflect awareness of that result."
Trump said in a speech at the Republican convention in Dallas on Sept. 9: "If Republicans win both the House and the Senate, we will pay a $5,000 dividend to every adult in America." According to CNBC, paying $5,000 to roughly 240 million U.S. adults would total $1.2 trillion (about 1,600 trillion won). That is comparable to the $1.27 trillion in national debt interest and $1.36 trillion in defense spending the U.S. government has paid so far in fiscal 2026 (Oct. 1 of last year through Sept. 30 this year).
Jang said that given the structure of U.S. federal elections, Republicans are likely to hold the Senate majority and Democrats the House. In U.S. history, the party in power has swept both chambers only three times: in 1934 under Franklin D. Roosevelt, in his first term during the Great Depression; in 1998 under Bill Clinton, who drew sympathy while facing impeachment over a sex scandal; and in 2002 under George W. Bush, buoyed by national unity after the Sept. 11 attacks.
The 100-seat Senate currently comprises 53 Republicans, 45 Democrats and two independents who caucus with the Democrats. Of the 35 seats up in the midterms — 22 currently Republican and 13 Democratic — 16 Republican and 10 Democratic seats are in safe party territory, effectively settling those races, by Jang's analysis. In that case, Republicans would reach 50 seats by winning just three of the nine remaining competitive races. At a 50-50 split, Vice President JD Vance, as president of the Senate, would cast the tie-breaking vote, giving Republicans effective majority control. "Even on the most optimistic projection, it looks difficult for Democrats to win a majority," Jang said. "Thanks to Trump's personal fundraising efforts, Republicans also have overwhelmingly more campaign money."
For the House, where all 435 seats are contested, Jang said most experts expect a narrow Democratic win. The chamber currently consists of 218 Republicans, 214 Democrats, one independent and two vacancies. According to Jang, prominent American political analysts generally expect Democrats to win 223 to 229 seats and Republicans 206 to 212. "The party in power has lost an average of 18 House seats in midterms, and the dominant view is that this time will be similar," Jang said. "The biggest question will be how pro-Trump candidates fare in Republican-leaning areas such as Texas."
Opposition vows probes of Trump family corruption and impeachment push if it wins; White House campaign response also a market factor
Jang said that even in a race whose outlines are largely set, late variables could emerge: inflation; defections among Trump supporters; positions on artificial intelligence and data centers; public opinion on Israel; and party members' distrust of the Democratic leadership. He also flagged how anti-establishment sentiment running through both parties' bases plays out as something to watch.
"For most of the nine competitive Senate states, the main export destination is Canada, so they are affected by Trump's retaliatory tariffs and rising diesel prices," Jang said. "Because of the Iran war, inflation and reduced health insurance benefits, 20% of Trump's support groups — men in their 20s and 30s, Hispanic men and Midwestern farmers — are drifting away." He added: "On AI data centers, ordinary Americans didn't even know what they were until last year, so there was no positive or negative opinion at all. But since May this year, even centrist governors from both parties have been pushing policies to block construction. Ordinary citizens lump AI together with issues like unmanned surveillance cameras, and because Trump keeps making statements defending data centers, Republican candidates in swing states are in an awkward position." Jang also said: "Most Democrats never liked former President Joe Biden to begin with, yet the party blocked other candidates from running. And when they swapped in Vice President Kamala Harris, the leadership didn't solicit any input at all. So this election is the first chance since the presidential race for Democrats to voice their discontent with the party leadership."
Both parties are campaigning on claims of an advantage. House Majority Leader Steve Scalise of Louisiana told the U.S. online outlet Axios on Oct. 17: "If we make this an election that highlights the contrasts, we'll win up to 225 seats." He argued Republicans "could hold a six-seat majority." Scalise identified 35 competitive districts and said Republicans could realistically flip about 15 of them.
Democrats, by contrast, said rising living costs are tilting the field heavily in their favor. Senate Minority Leader Chuck Schumer of New York told The Washington Post on Oct. 18: "If the election were held today, we would be the majority." He said the current environment is strikingly similar to the 2006 midterms, when Democrats swept both chambers.
Rep. Robert Garcia of California, the ranking Democrat on the House Oversight Committee, told the Financial Times on Oct. 17 that if Democrats win the majority, their first investigation would target corruption allegations involving Trump's family. Potential targets include Donald Trump Jr., vice chairman of the Trump Organization, who secured multimillion-dollar contracts with the Defense Department (Department of War) through an investment firm; eldest son-in-law Jared Kushner, suspected of profiting while running Middle East diplomacy; and Tesla Chief Executive Elon Musk, who led the Department of Government Efficiency in the first half of last year. According to the FT, Trump's family has earned at least $1 billion (about 1.4 trillion won) from various cryptocurrency ventures.
The House Oversight Committee is a standing panel with broad authority to monitor and investigate the federal government. Garcia is expected to chair it if Democrats win the House. He also cited gathering evidence that could support impeaching Trump as one of his investigative goals.
With voters' financial strain intensifying as never before around the midterms, the campaign strategies Trump deploys are likely to remain a market variable for some time. Because the Middle East war is unlikely to be resolved fundamentally, high oil prices and high interest rates could exert considerable force until the vote. On Oct. 18, Trump repeated his familiar claim to reporters at the White House in Washington that "the Iran war will end soon and oil prices will plunge," without specifying when.
※ "Trump Stocker" is a column delivering on-the-ground reporting and analysis of U.S. markets, companies, policy, politics and diplomacy that can inform investment decisions in the era of President Donald Trump. Subscribe to receive useful news from the United States.
