Thinking of buying a home?
If you’re thinking of buying a home, it’s prudent to know if current events have any impact on the direction of mortgage rates. After all, the direction of mortgage rates means you can buy more house for the same money if they go down, or less if they go up.
Does the outcome of the presidential election have any influence on mortgage rates? Up? Down? Remaining the same?
Mortgage Rates Are Determined by the Federal Reserve
Mortgage rates are determined by the Federal Reserve, which meets about eight times a year and looks at economic data. If the economy looks strong, they may decide to raise rates. If it looks weak, rates are sometimes lowered to stimulate the economy.
The governance of the Federal Reserve, which determines the direction of interest rates, was designed in part to remove it from partisan politics. Although the president of the United States nominates the chair of the Federal Open Market Committee (FOMC), they serve for four-year terms and cannot be replaced. In other words, the inauguration of a new president does not coincide with the ability to name a new Fed chair, although that will happen down the road, when the term is up.
The governors of the Fed serve 14-year terms, and also cannot be removed. That means, for example, that the overall governance of the Fed cannot be removed because an incoming president doesn’t like their monetary policies.
It’s the Economy, Not the President
The ultimate determinant of interest rate direction and thus mortgage rate direction is the economy, not who sits as president.
Rates currently are at historically low levels, making this a good time to buy a house.
A recent survey of economists showed a consensus that the economic picture would be strong in November 2016, with low unemployment and good consumer confidence.
However, the consensus on the direction of interest rates has changed several times this year, with an unexpectedly weak job report and the British vote to leave the European Union affecting plans to hike.
The best bet is to stay tuned to the economic news.