The 2024 presidential election is shaping up to be an interesting one. With President Joe Biden stepping down from the race, many are wondering how this will affect mortgage rates. Let’s break down what we know.
The Role of the Federal Reserve and Mortgage Rates
What is the Federal Reserve?
The Federal Reserve, often called “The Fed,” plays a big role in the U.S. economy. It doesn’t directly set mortgage rates, but its actions can influence them. The Fed sets a target for the federal funds rate, which affects how much banks charge each other for short-term loans. This can impact other interest rates, including mortgage rates.
How Does the Fed Influence Mortgage Rates?
While the Fed doesn’t set mortgage rates, its policies can affect the economy. For example, if the Fed raises its target rate, it becomes more expensive for banks to borrow money. This can lead to higher mortgage rates. On the other hand, if the Fed lowers its target rate, mortgage rates might go down too.
Biden Stepping Down: Immediate Effects on Mortgage Rates
President Joe Biden announced on July 21, 2024, that he would not run for re-election. This decision came after pressure from his own party and donors who were hesitant to fund his campaign.
Will Biden Stepping Down Affect Mortgage Rates Right Away?
According to experts, Biden’s decision to step down is not likely to have an immediate impact on mortgage rates. Michael Collins, a financial expert, says that changes in interest rates are mainly driven by economic factors and decisions made by the Federal Reserve, not by individual political candidates.
The Federal Reserve and the Election
What Happens During Election Years?
Election years often bring uncertainty, which can affect financial markets. Historically, the stock market tends to be more cautious during election years, which can also influence mortgage rates.
Historical Data on Mortgage Rates During Elections
Let’s look at past election cycles to see how mortgage rates have behaved:
- Nov-Dec 2020: Rates slightly increased by 0.03%
- Nov-Dec 2016: Rates increased by 0.45%
- Nov-Dec 2012: Rates decreased by 0.04%
- Nov-Dec 2008: Rates decreased by 0.80%
From this data, we can see that mortgage rates don’t always follow a predictable pattern during election years.
Potential Long-Term Effects
Kamala Harris as the Democratic Candidate
Vice President Kamala Harris has stepped in as the Democratic candidate following President Biden’s decision to step down. The policies and economic plans she supports could influence the direction of interest rates. If her campaign promotes increased government spending, this might require additional monetary policy support, potentially affecting mortgage rates.
What About the Federal Reserve’s Decisions?
The Federal Reserve is expected to make its next decision on interest rates at the end of July. Most experts believe that the Fed will not cut rates at this meeting, but there is a high likelihood of a rate cut in September. These decisions are based on economic conditions, not political changes.
Conclusion
So, will mortgage rates change with Biden dropping out and the presidential election going on? The answer is complicated.
While Biden’s decision to step down might not have an immediate impact, the uncertainty surrounding the election and the actions of the Federal Reserve could influence mortgage rates in the future. For now, it’s best to stay informed and watch how the situation develops.
If you have more questions about mortgage rates or need advice on your home loan, feel free to contact us. We’re here to help you navigate these uncertain times.
