There are a number of factors to consider before casting your vote in this year’s election. Many Americans, especially those looking to buy a home, want to know how a new president can affect mortgage rates. We’ve already seen rates hit record lows multiple times this year, and voters are curious if that trend will continue in 2021 and beyond.
Who actually sets mortgage rates?
It’s reasonable to assume that the Federal Reserve and U.S. government work hand-in-hand to determine mortgage rates. The reality, though, is that rates fluctuate based on the performance of mortgage-backed securities (MBS). The easier it is to sell these products, the lower rates usually go.
Then there’s the 10-year Treasury yield, which mortgage experts often rely on for rate forecasts. According to The Motley Fool, this is because treasury bonds and mortgage compete for the same investors. Since mortgages are regarded as a slightly riskier investment than Treasury notes, lenders typically keep mortgage rates higher.
The federal funds rate, meanwhile, dictates the overnight borrowing rate for banks. So the combination of the 10-year Treasury yield, mortgage-backed securities, and the federal funds rate play a major role in setting mortgage rates. Lenders will also account for inflation, unemployment, and the bond market itself.
What’s happened to rates after past elections?
A little bit of everything, to be honest. Bankrate analyzed the 12 presidential elections since 1972 and found that mortgage rates increased six times and fell six times.
In 1980, rates jumped a full percentage point following the initial nomination of Ronald Reagan. Mortgage rates then dropped by almost the same amount four years later after Reagan’s re-election.
What’s been the movement of rates in the most recent presidential elections? Well, mortgage rates barely nudged post-election in 2012. That certainly wasn’t the case in 2016, when rates rose from 3.47% in October to 4.20% in December soon after the election of Donald Trump.
The takeaway here is that we really don’t know what’s going to happen with mortgage rates on the heels of the 2020 election. As we mentioned at the beginning of this article, rates have been incredibly favorable for an extended period of time. Industry experts would be the first to tell you that mortgage rates have never been this low for this long.
So, yes, plan on there being a shift in rates one way or another. But whatever happens, keep in mind that they may stay low for a few more years. That’s great news for anyone hoping to get into their first, next, or forever home.
Should you wait until after the election to get a mortgage?
You may think it’s most sensible to hold off on getting a mortgage until after the election. But if you’re ready to proceed with the lending process, why wait? Rates continue to hold steady near historic lows, even during a pandemic.
The last thing you want to do is put the brakes on your home buying journey in order to see how the election shakes out. Sure, the possibility exists that rates could drop in the coming weeks and months. There’s also the chance that mortgage rates could increase to pre-pandemic levels.
How to begin the home buying process
Let’s say you’re interested in buying a home now but aren’t really sure where to start. Do you browse listed properties before doing anything else? Do you reach out to family members and friends about potential real estate agents?
Here at American Home Agents, we recommend getting pre-qualified for a mortgage prior to starting your search. This will allow you to see exactly how much home you can afford based on your financial situation. As long as you choose the right lender, this step should be simple and straightforward.
Once you’re pre-approved, it’s time to find a real estate agent! But don’t make the mistake of selecting the first realtor you come across online. Figure out which agents are highly rated in your area and note what sets them apart.
It’s absolutely critical that a real estate agent not only understands the industry, but also goes above and beyond for clients. A trusted realtor is in constant communication with their clients and answers any questions they may have. Unfortunately, there are plenty of real estate agents who do the bare minimum and are only in the business to get paid.
At American Home Agents, we provide exceptional customer service. We love nothing more than seeing a client get into their dream home. And we would be thrilled to assist with your home buying journey.
Give us a call at (303) 695-5900.