If you’ve been watching mortgage rates recently, it probably feels a bit like a roller coaster. One day they’re up, and the next day they’ve dropped a little. So, what’s causing all this fluctuation? Let’s explore a few key factors behind the volatility and what it could mean for you.

The Market’s Reaction to the Election

A key reason mortgage rates fluctuate is the political climate. During election seasons, there's often a lot of uncertainty in the financial markets, and this year is no exception. The markets react not just to the election results but also to the anticipated economic policies of the winning candidates. Looking at the changes in mortgage rates over the last few weeks, the National Association of Home Builders (NAHB) notes that...

““. . . the primary reason interest rates have been on the rise pertains to the uncertainty surrounding the presidential election. Although the election is now complete, there continue to be growing concerns over budget deficits.”
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— National Association of Home Builders (NAHB)

Recently, this anticipation has led to a small increase in mortgage rates as the markets react and adjust. Various factors, such as international tensions, supply chain issues, and trade policies, can influence investor sentiment, prompting a shift towards safer assets like bonds. This shift can indirectly affect mortgage rates. In short, the more uncertainty there is—whether globally or domestically—the higher the likelihood that mortgage rates will change.

The Economy and the Federal Reserve

Inflation and unemployment play significant roles in influencing mortgage rates. The Federal Reserve, often referred to as the Fed, is actively trying to manage inflation and keep a close eye on the economy in the process. As long as inflation levels decrease and the job market indicates that employment is strong, the Fed plans to keep lowering the Federal Funds Rate.

The Fed doesn’t directly control mortgage rates, but their decisions definitely influence them. Typically, when the Fed lowers rates, mortgage rates tend to respond. During their meeting on November 6-7, the Fed had the data to support another cut to the Federal Funds Rate. Although this decision was anticipated and much of the mortgage rate movement occurred before the meeting, there was still a small decrease in rates afterward.

What To Expect in the Coming Months

Mortgage rates are expected to fluctuate based on the Fed’s policy changes and various economic indicators. The markets are likely to adopt a wait-and-see approach, responding to new developments as they arise. Additionally, the change in administration adds a layer of unpredictability. A recent article from The Mortgage Reports discusses this further.

““Today’s economic indicators come with mixed pressures on mortgage rates and we’re likely to be in for a good amount of volatility as markets adjust and respond to the election . . .””

— The Mortgage Reports

Having a team of real estate experts with you is the best way to navigate this landscape. These professionals can help you grasp what's going on and offer the guidance you need to make informed decisions in the housing market.

Bottom Line

The bottom line is that the ups and downs in mortgage rates today will keep being influenced by economic conditions and political developments.

It’s the perfect moment to rely on seasoned experts. A reliable real estate agent and a knowledgeable mortgage lender can guide you through the process. With their support, you can make well-informed choices.