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Mortgage rates move unpredictably in the weeks after presidential elections — not always, but often enough to humble any forecaster who is asked to predict mortgage rates in November of an election year.
In contrast, mortgage rates are predictable during the month before a presidential election. I said rates wouldn’t move much in October, and sure enough, they drifted just a little: The 30-year fixed-rate mortgage averaged 2.95%, down a smidge from September’s average of 2.98%.
To see how difficult it is to predict the future, answer this one-question quiz about the past: What happened to mortgage rates after the disputed 2000 election — did they go up, down or stay about the same?
The answer is that the 30-year fixed-rate mortgage was steady in November, remaining in a range of 7.73% to 7.79%, according to Freddie Mac records. But the rate tumbled more than half a percentage point that December, which is an unusually fast descent. It fell both before and after the Supreme Court’s Bush v. Gore decision on Dec. 12, and averaged 7.13% in the last week of the year.
Since 2000, election-year Novembers have sent rates up, down, about the same, and up again.
This history lesson teaches us a couple of things:
First, mortgage rates moved more than half a percentage point soon after three of the last five presidential elections (up once, down twice, if you’re keeping score).
Second, those big movements in rates hadn’t been widely predicted. Each time, observers gave after-the-fact explanations for the movement of mortgage rates, but the experts could have summoned equally plausible explanations if rates had moved the opposite way.
If there’s any advice to give, it’s this: Don’t try to time the mortgage market based on the expected election results. You might be surprised not only by the winner, but by the market’s reaction as well.