Could Election Uncertainty Impact Mortgage Rates?

November 4, 2020

Mortgage rates hit record lows in 2020, but how will the outcome of this year’s election impact rates? A replay of the post-election increase in 2016 could happen, mortgage experts say.

In 2016, the average 30-year fixed-rate mortgage went from 3.47% in October to 4.2% in December.

However, once the results of this year’s election are final, we may not see the same results. The Mortgage Reports highlights how previous presidential elections have affected mortgage rates—positively, negatively, or even not at all. For example, after the 2012 and 2004 elections, in which the incumbent was reelected, rates essentially stayed the same; during 2008’s campaigns, rates reached 6.2% in October, then fell to 5.29% in December.

Mortgage rates rise and fall with the financial markets. “Lending up to the 2020 election cycle, interest rates are remarkably low,” The Mortgage Reports says.

Most economists—regardless of the presidential election’s outcome—have predicted that mortgage rates in 2021 will hover around historic lows of 3%.

The Mortgage Reports shows scenarios where either candidate’s election could prompt rates to go down or up. The president does not control mortgage rates, but the outcome and the direction of their policies could impact them, The Mortgage Reports says.

The Federal Reserve, an independent institution, has cut the federal funds rate to nearly zero. Mortgage rates don’t follow the Fed’s funds rate, but that low-rate environment has helped to influence mortgage rates.

“No matter who is elected, no one expects the Fed to raise rates any time soon,” The Mortgage Reports says. “The coronavirus presents too big a risk to the economy to do that.”

Source: 
Forecast: Will the 2020 Election Change Mortgage Rates,” The Mortgage Reports (Nov. 3, 2020)