a young man lies on a couch with a laptop in front of him researching the election and mortgage rates. Next to him a large dog puts his face close to the laptop Yesterday, I was asked “should I lock my rate before the election just to be safe?” 

 My response was that I think people are safe not to lock b/c the election is likely to be contested. 

 And this is why.

The polls are generally in favor of Mr. Biden, but they are constantly moving and are all over the place.

More significantly though is how convinced supporters on both sides are that their candidate will win.

I was motorcycling through South Texas last week and was very surprised by the amount of fervent Trump supporters and by how certain they were that he would win.

Similarly, when I am on the Coasts, I see far more Biden supporters and I see that they too are often 100% certain that their candidate will win.

When I see two factions with 100% certainty of an outcome, I think… “somebody has to be wrong, and this is not going to end well…”

When so many are so certain they are correct, it is highly unlikely that the results of the election will be accepted irrespective of who wins.

And that is the point of this blog.

The type of notable uncertainty that a contested presidential election would create usually pushes rate down.

This is b/c investors move money en masse from stocks to bonds, pushing down rates, while they wait out the uncertainty.

I blogged a few weeks about Who’s Better For Rates – Trump or Biden?, giving the edge to Biden b/c the markets might perceive Trump’s agenda as slightly more pro-growth.

But, I focused on a victory for one or the other, and did not discuss a “contested election.”

Here is a short blog I wrote last year about what moves interest rates in general, highlighting five factors: (1) Economic Data; (2) Inflation; (3) Geopolitical Crises; (4) Supply & Demand; and (5) The Fed.

A contested presidential election definitely falls under #3.

Could I be wrong?

Yep.

In 2016, I, like most everyone else, thought Hillary would win and that rates would hold steady no matter what happened.

And Trump won and rates shot up 1/2%.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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