How Will the 2024 Presidential Election Impact Mortgage Rates?

The 2024 presidential election is shaping up to be one for the history books. With President Joe Biden announcing he won't seek re-election, many are curious about how this could impact various financial elements, especially mortgage rates.

Let's break down what we know and what we can expect.

The Federal Reserve's Influence on Mortgage Rates

Understanding the Federal Reserve

The Federal Reserve, or "The Fed," is a critical player in the U.S. economy. Although it doesn't set mortgage rates directly, its actions have a significant influence. The Fed sets a target for the federal funds rate, which affects how much it costs banks to borrow money from each other in the short term. This, in turn, can impact other interest rates, including those for mortgages.

How the Fed Affects Mortgage Rates

Even though the Fed doesn't determine mortgage rates, its policies can sway the broader economy. For example, when the Fed hikes its target rate, borrowing becomes more expensive for banks, which can lead to higher mortgage rates. Conversely, if the Fed lowers its target rate, mortgage rates may fall as well.

Biden Stepping Down and Its Immediate Effects on Mortgage Rates

On July 21, 2024, President Joe Biden announced he would not run for a second term. This decision followed mounting pressure from his party and major donors who were reluctant to continue backing his campaign.

Experts suggest that Biden's decision to step down is unlikely to cause an immediate fluctuation in mortgage rates. According to financial expert Michael Collins, changes in interest rates are predominantly driven by economic factors and decisions made by the Federal Reserve rather than individual political candidates.

The Federal Reserve and Election Year Dynamics

Election Year Uncertainty

Election years often bring a level of uncertainty that can affect financial markets. Historically, the stock market tends to be more cautious during these periods, and this cautious sentiment can also influence mortgage rates.

Historical Data on Mortgage Rates During Elections

Examining past election cycles provides some insights:

• Nov-Dec 2020 saw a slight increase in rates by 0.03%
• Nov-Dec 2016 witnessed a rise in rates by 0.45%
• Nov-Dec 2012 experienced a decrease in rates by 0.04%
• Nov-Dec 2008 marked a substantial drop in rates by 0.80%

This data shows that mortgage rates do not always follow a predictable pattern during election years.

Potential Long-Term Effects on Mortgage Rates

Kamala Harris as the Democratic Candidate

With Biden stepping down, Vice President Kamala Harris has emerged as the Democratic candidate. The economic plans and policies she supports could shape the direction of interest rates. For instance, if her campaign advocates for increased government spending, this might necessitate additional monetary policy support, potentially affecting mortgage rates.

Federal Reserve's Upcoming Decisions

The Federal Reserve is scheduled to make its next decision on interest rates at the end of July. Most experts anticipate that the Fed will not cut rates during this meeting, but there is a high likelihood of a rate cut in September.

These decisions are based on prevailing economic conditions rather than political changes.

Conclusion

Will mortgage rates change due to Biden stepping down and the upcoming presidential election? The answer isn't straightforward. While Biden's decision may not immediately impact mortgage rates, the uncertainty surrounding the election and the actions of the Federal Reserve could influence rates in the future.

It's crucial to stay informed and monitor how the situation unfolds. If you have questions about mortgage rates or need advice on your home loan, feel free to reach out.

We're here to help you navigate these uncertain times, so please connect with us today!