Do Mortgage Rates Drop in an Election Year?

As a mortgage lender, it's important to understand the outside forces that might impact the mortgage rates. So, as we head into an election year, what can we predict will happen with  mortgage rates? Keep reading to find out.

Busting Myths

Alright, let’s bust the myth right here and now—contrary to popular belief, there is no consistent data to support the notion that interest rates will improve during an election year.

Let’s take a glimpse at this graph, here.

Looking at the past 13 elections, it's evident that mortgage rates have been hit and miss, with no clear pattern or trend. The housing market and mortgage rates during election years are influenced by various factors, and historical data shows that the market tends to respond to uncertainty, rather than being directly affected by the election itself.

Will the Feds get involved?

Some people believe that the Federal Reserve might lower inflation to favor a particular party in power, but this is a myth. In reality, the Fed's rate policy is unlikely to be swayed by an upcoming election, as it operates independently and makes decisions based on economic indicators and data, rather than political considerations.

More Recent Data

When zooming in on the historical data during the last six election years, again, you can see there isn’t a clear pattern. For instance, in 2020, interest rates were near record lows, but these changes were primarily due to the pandemic and economic concerns, rather than the election. Back in 2004 and 2008 rates we’re all over the place. Again, primarily due to economic factors.

Final Thoughts

It's essential to be educated about the actual impact of elections on mortgage rates. As a mortgage lender, it's crucial to provide clients with accurate information and dispel common myths about interest rate trends during election years.

The good news is that as of now, mortgage rates have decreased for the fourth time in five weeks, with the 30-year fixed rate dipping to 7.37 percent, the lowest level in 10 weeks. There has been a slight increase in applications overall, driven by a five percent increase in purchase applications, but refinance applications decreased over the week.

If you’re looking for more mortgage guidance and interest rate education as we head into the new year, make sure to reach out to our team!