We have a great client who was holding off on a “no cost” refinance because he was convinced rates were going to fall further this year “because it’s an election year.”
But fortunately, he finally locked in his rate last week, taking advantage of the temporary rate drop (caused by the Iran skirmish) right before rates shot up again.
The above example is exactly why I am revisiting this topic, after touching on it as recently as November.
Clients all too often hold off on buying or refinancing in or near Presidential election years because they mistakenly believe the myth that rates always go down during election years.
Clients mistakenly believe they will be able to lock in much lower rates if they wait for the inevitable election-year-rate-reduction – that only comes about 50% of the time (in other words – randomly).
Florida loan officer (and former NFL player) – Chris Doering – wrote a great blog about election-year-interest-rates here.
Mr. Doering points out that the Federal Reserve remains independent of the President, because of its charter and because its board of seven governors all have 14-year terms that go far beyond any President’s term.
Presidents can’t simply force the Fed to lower rates – even though they often try.
He also sets out a table showing interest-rate-trends during each of the last twelve election years, from 1972 (the first election after we came off the “gold standard”) through 2016.
Rates went up in some years and down in others, but they mostly moved so little that no conclusion can be drawn.
The only conclusion that can drawn is that there is no reason to expect rates to go down.
Over the next six months in fact, it is far more likely that rates will actually increase because the economy is so hot.
Mr. Doering’s advice mirrors our advice – get in while the gettin’ is good 😊
Finally – if rates do fall again, borrowers can always simply take advantage of a “no cost” refinance.
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