One of our borrowers on Friday suggested that we hold off on locking his rate “because rates go down in election years”. This is a prevailing myth that we address every time there is a Presidential Election looming.
Rates do not always go down or stay low in election years. According to a WSJ article published a few years ago, there is about a 50/50 chance that they will go up or down. In other words, elections usually have no correlative affect on rates.
Also, as we have discussed, external factors like inflation and the world economy move rates irrespective of what the President hopes for, or what the Fed says or does.
The current administration in fact would like to see variables that push rates upward. Positive economic reports like GDP growth, increasing employment rates, increasing consumer confidence, or increasing retail sales are signs of economic strength that will help President Obama’s re-election efforts. But, at the same time, such signs of economic strength also push rates upward.
We think we will see another rate decrease, however, because of resurfacing troubles in Europe and recent signs of economic weakness in the U.S.
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