The Odd Couple? Mortgage Rates & Election Years
“Politicians and diapers must be changed often, and for the same reason.” ~Mark Twain
There is no escaping it; debates, primaries and non-stop political rhetoric across all media channels. It’s 2016 and it’s an election year. While it may be possible to find precise and scientific analysis on interest rate trends during the months before and after we elect a new President, it’s important to keep things in perspective if you find yourself wondering where mortgage rates could go this year, and whether or not ballot box results should be taken into consideration when buying a home. A statistician, technician or financial analyst I am not, but upon doing some broad research of every election year since Freddie Mac
began tracking the rates on 30-year fixed rate mortgages, I think that what you’ll see below will encourage you to further rely on the things you actually DO control and the experience and wisdom of your own mortgage advisor, rather than the outcome of an unpredictable election still some months away.
Let’s look at the math. Since 1971, there have been eleven Presidential elections. Of those contests, six have been won by Republicans and the remaining five by Democrats. From January to December of any election year, there have only been ten outcomes where rates differed from the start to finish. In 1972, when Richard Nixon was re-elected, rates began and concluded at the exact same level --- a trend you may be surprised to know, but which we will come to find out is not all that extraordinary. In the remaining ten elections, rates ended the year lower than they’d started six times. So historically, nearly two-thirds of the time, we’ve finished an election year lower than we’d started. In the interest of being fair and balanced, Democrats were elected in four of the six years where rates settled lower and Republicans prevailed in three of the four contests where rates trended higher.
But let me cut right to the data I see as significant. Over more than a forty year span, fluctuations in rates from start to finish of any election year have actually been quite small. I covered above that one year, in fact, had no change at all. What about the opposite? How significant was the largest swing? Back in 1980, as some may recall all too vividly, interest rates were approaching historic highs, and there was a net increase of 1.91% as the Reagan administration took office. But on average, mortgage rate changes 
in election years have averaged less than one-half percent (.48%) and have exceeded a change of that size in only four of these years. Given that 2016 started at near historic lows once again, it bodes well that regardless of election outcome, rates are unlikely to spike higher simply as a result of who wins the Oval Office.
It would be foolish, however, to let one’s guard down at any point in this day and age. With our Federal Reserve actively communicating and acting upon its intent to “normalize” interest rates, the financial markets and general public have been served fair warning that the low rate environment that has been so conducive to the housing market will not last indefinitely. Beyond our shores, global economies also contend with their own challenges and political systems. But this time, unlike the seventies, the United States and our interest rate markets are not as insulated from volatility as we once were.
As we embark on the second half of 2016 and the excitement and changes it will bring, I wanted to issue
this PSA to remind you that I’m available to help with all of your mortgage needs. I totally get that it is easy to get lost in the uncertainty of just what a major political change might do to the housing market, the stock market or the broader global economy. But history has proven solidly that we can indeed continue to make careful assumptions and smart decisions despite the noise and anticipation of a change in leadership.
E pluribus unum,
Rob Spinosa
Executive Loan Advisor
NMLS: 22343 CalBRE: 01297944
Cell: 415-367-5959 Fax: 415-366-1590
rspinosa@rpm-mtg.com www.rpm-mtg.com/rspinosa
1058 Redwood Highway, Frontage Road, Mill Valley, CA 94941
RPM Mortgage, Inc. – NMLS#9472 – Licensed by the Department of Business Oversight under the Residential Mortgage Lending Act. Equal Housing Opportunity.
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