Election cycles, especially presidential ones, tend to create waves of uncertainty across various sectors of the economy, and the housing market is no exception. In the months leading up to and after an election, mortgage rates can fluctuate due to market reactions to potential policy changes.

Both buyers and lenders navigate a climate of unpredictability, affecting borrowing conditions for homebuyers, particularly veterans using VA loans. Whether the candidates are Donald Trump, Kamala Harris, or anyone else, their policies and anticipated economic strategies can stir up uncertainty, which in turn influences the real estate market.

How Election Cycles Affect Mortgage Rates

Mortgage rates often experience instability during election periods as financial markets react to uncertainty surrounding future economic policies. The Federal Reserve, though independent, is influenced by economic conditions, and election rhetoric often sways consumer confidence and market trends.

Historical Data on Election Impact Past elections show that mortgage rates tend to remain volatile during the election year and settle after the winner is declared.

For example, in 2016, rates increased by about 0.5% following Donald Trump’s victory, as the markets anticipated changes in fiscal policy. Similarly, mortgage rates during the 2020 election, in which Kamala Harris was on the ticket with Joe Biden, saw fluctuations but stabilized as the policies became clearer post-election.

“During election years, rates tend to fluctuate more because the market becomes risk-averse,” says Emily Rodriguez, Chief Mortgage Analyst at Veteran Home Solutions. “Borrowers should consider locking in rates early if they feel uneasy about how the election might influence future borrowing conditions.”

Uncertainty’s Role in Economic Markets

The uncertainty surrounding who will win the election, and how that will affect economic policies, can directly influence investor behavior. Investors often respond to risk by moving capital into safer assets, such as government bonds.

This shift tends to reduce bond yields, which typically leads to lower mortgage rates. Conversely, after a decisive election outcome, the bond market may recover, which could lead to a gradual rise in mortgage rates.

Election Promises and Their Impact Different candidates have different economic proposals that may affect how lenders and investors respond. For instance, during Trump’s administration, his tax cuts and deregulation efforts helped stimulate the housing market, causing mortgage rates to rise.

Conversely, Kamala Harris’s proposed $25,000 first-time homebuyer tax credit during the 2020 election campaign was viewed by some as a potential stimulus for the real estate market. However, it also raised concerns about inflation and borrowing costs, contributing to rate instability.

Factors that Influence Mortgage Rates During Elections

Several factors contribute to rate fluctuations during election periods:

• Economic Policies: Candidates’ tax plans, regulations, and infrastructure proposals can create uncertainty.
• Federal Reserve Actions: Though independent, the Fed may react to changes in the economy spurred by election outcomes, influencing interest rates.
• Inflation Expectations: Markets watch candidates’ stances on inflation, which can affect borrowing conditions.
• Global Markets: Geopolitical and economic reactions to a U.S. election can affect foreign investment and interest rates.

Mortgage Rate Influencers in Election Years

 “Inflation plays a critical role in mortgage rate changes during elections. If a candidate proposes significant spending, investors get nervous about inflation, which may drive rates higher,” explains John Thompson, Senior Loan Officer at Patriot Financial Group.

Tips for Homebuyers During Election Periods

For homebuyers, particularly veterans, navigating mortgage rates during an election year can be tricky. Here are a few strategies to consider:

• Lock in Rates Early: If rates are low, consider locking them in before potential post-election spikes.
• Explore Adjustable-Rate Mortgages (ARMs): ARMs can offer lower rates during periods of uncertainty, with the option to refinance later.
• Consult with Experts: A VA loan expert can provide insight into how policies from candidates like Trump or Harris might affect your specific situation.

Veterans and VA Loans: Veterans have a unique advantage in the homebuying process, as VA loans typically offer lower interest rates than conventional loans. However, during election cycles, even VA loan rates can fluctuate due to broader market conditions. Veterans are encouraged to work closely with their lenders to determine the best time to lock in rates, especially in volatile markets.

“Veterans using VA loans should be mindful of election-year volatility. Locking in a rate sooner rather than later may be a good strategy, particularly in a rising rate environment,” advises Michael Green, Mortgage Specialist at Valor Lending.

 

The Role of Economic Policies in Post-Election Mortgage Rates

Economic policies introduced by the new administration can have a significant impact on mortgage rates. Whether it’s tax reform, infrastructure spending, or changes in financial regulations, these policies often shape the direction of interest rates in the months and years following an election.

For instance, Donald Trump’s administration implemented tax cuts that spurred economic growth but also led to inflation concerns, which pushed mortgage rates higher. On the other hand, proposals from candidates like Kamala Harris, such as the $25,000 homebuyer credit, may stimulate housing demand, creating pressure on rates in a different way.

 Examples of Post-Election Economic Policies and Mortgage Rate Impact

Economic policies like tax cuts can reduce government revenue, leading to an increased budget deficit, which can push up inflation and interest rates. Conversely, a more fiscally conservative approach, with reduced government spending, may lead to lower rates if inflation remains under control.

Conclusion: What to Expect Post-Election

After the election, markets generally stabilize as policies become clearer. Regardless of who wins—whether it’s a continuation of Trump-era policies or new initiatives from someone like Kamala Harris—markets tend to normalize once uncertainty dissipates. While rates may rise slightly, they often stabilize once the election-induced uncertainty is removed.

For veterans and other homebuyers, staying informed and working with a knowledgeable lender is key to navigating these uncertain times. Taking advantage of VA loan benefits, locking in rates early, and understanding market trends can ensure that you make the best decision for your financial future.

FAQs About Mortgage Rates and Elections

1. How do presidential elections affect mortgage rates?Presidential elections introduce uncertainty into the market, which can cause mortgage rates to fluctuate leading up to and following the election.
2. Should I lock in a mortgage rate before or after the election?
   Locking in a rate before the election can protect you from post-election rate spikes, which are common if the market anticipates economic changes.
3. Why do interest rates rise after an election?
   Post-election, markets tend to stabilize, and as economic policies become clearer, rates may rise in response to increased investor confidence.
4. How do Trump and Harris policies affect mortgage rates?
   Trump’s tax cuts led to rate increases during his term, while Harris’s proposed homebuyer credit raised inflation concerns, potentially affecting rates.
5. What is the impact of the Federal Reserve during an election year?
   The Fed may raise or lower interest rates depending on the economy’s state, which is influenced by the election.
6. Can I still get a VA loan during the election?
   Yes, VA loans remain available regardless of elections, but rates may fluctuate with the market.
7. What’s the best mortgage strategy during election uncertainty?
   Locking in rates early and consulting with a mortgage expert are the best strategies during uncertain times.