Why Are Mortgage Rates Volatile Right Now?

If you’ve been keeping an eye on mortgage rates lately, you may feel like you’re on a roller coaster ride. One day rates are up; the next they dip a bit. So, what’s driving this constant change? Let’s dive into just a few of the major reasons why we’re seeing so much volatility, and what it means for you.

The Market’s Reaction to the Election

A significant factor causing fluctuations in mortgage rates is the general reaction to the political landscape. Election seasons often bring uncertainty to financial markets, and this one was no different. Markets tend to respond not only to who won, but also to the economic policies the winners are expected to implement.

When it comes to what’s been happening with mortgage rates over the past couple of weeks, the National Association of Home Builders (NAHB) says: “. . . 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 continues to be growing concern over budget deficits.”

The tax rate cuts that have been proposed by now President-elect Trump will no doubt add to the deficit and any corresponding budget cuts will in all likelihood not be enough to cover the income loss.

In the short term, this anticipation has caused a slight uptick in mortgage rates as the markets adjust and react. Additionally, factors like international tensions, supply chain disruptions, and trade policies — such as tariffs — can drive investor sentiment, causing them to seek safer assets like bonds, which can indirectly impact mortgage rates. Essentially, the more global or domestic uncertainty, the greater the chance that mortgage rates may shift.

The Economy and the Federal Reserve

Inflation and unemployment are two other big drivers of mortgage rates. The Federal Reserve (the Fed) has been working to bring inflation under control, and has been closely monitoring the economy as they do. As long as inflation continues to moderate and the job market shows signs of maximum employment, the Fed will continue its plans to cut the Federal Funds Rate.

Although the Fed doesn’t set mortgage rates, their decisions do have an impact, and typically a cut leads to a mortgage rates response. At their November 6-7^th meeting, the Fed had the data they needed to make another cut to the Federal Funds Rate. Since that decision was expected and much of the mortgage rate movement happened prior to the meeting, there was only a slight dip in rates.

What To Expect in the Coming Months

As we look ahead, mortgage rates will respond to changes in the Fed’s policies and other economic indicators. The markets will likely remain in a wait-and-see mode, reacting to each new development. And, with the transition of a new administration comes an element of unpredictability.

A recent article from The Mortgage Reports explains: “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 . . .”

Bottom Line

Don’t be discouraged if you are looking to make a change in the new year. Mortgage rates are still lower than they have been and housing price increases continue to moderate.

The real expects who understand the economics of the market — not your favorite cable news talking head or your Uncle Bob who “knows a little something about real estate” because he bought a house 20 years ago — are predicting a very active January.

So, if you’re ready to make a change, let’s talk. The holidays are a great time to consider your options as our homes look the best they do all year. It’s also a perfect time to take marketing photos, even if you’re going to wait for a few months before selling.

We’re ready to help. You can find us at 508-360-5664 or [email protected].

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We sincerely hope that you will be able to enjoy the Thanksgiving holiday with family and friends. The number of chairs around our family’s table has gotten a little smaller, but we cherish our time together and the memories of those who are no longer with us. Happy Thanksgiving.

Mari and Hank

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision.