Market Update: What the Election and Fed Rate Cut Mean for Mortgage Rates

Hello, everyone! We made it through the election storm! Whether the results went the way you hoped or not, here we are, ready for what’s next.

Before jumping into this week’s updates, we want to take a moment to honor Veterans Day. We deeply appreciate the courage and dedication of our veterans—thank you for your service and the freedoms you’ve helped protect.

Now, let’s dive into the latest market updates!

Read time: ~4 minutes

Rates ended FLAT compared to last week, and volatility was HIGH. Rates are in the low high 6’s, low 7’s for most loan types without paying discount points. Paying discount points can get you in the mid 6’s.

Fed Cuts Rates, Election Ends—But Mortgage Rates Stay Put

It’s been a rollercoaster year, with clients consistently voicing their reasons for holding off on buying or selling in 2024.

Two of the most common concerns we keep hearing are:

• “I’ll wait to see if the Fed cuts rates.”

• “I don’t want to make a move until after the election.”

With the election behind us and the Fed having cut rates last week, what impact did it actually have on mortgage rates? Surprisingly, not much at all. 🙁

So why didn’t mortgage rates drop as the uncertainty fades?

As I have covered in past newsletters, October’s spike in mortgage rates had a lot to do with market anticipation. As Trump’s odds of winning the election increased, investors shifted from safer bonds into stocks, which pushed mortgage rates higher. This trend mirrors what we saw in 2016 when Trump’s pro-business platform spurred investor confidence, boosting stocks and nudging rates up.

And while the Fed did cut rates by 0.25% last Thursday, this move was fully expected, so mortgage rates barely budged.

This month shows how markets often move based on what’s anticipated. In many cases, the market reacts ahead of the news—because that’s exactly what it’s built to do. Following the flow of money will often reveal where rates are heading next.

How Much Power Does a President Really Have Over Interest Rates?

This week, Fed Chairman Jerome Powell was asked if he would resign if President Trump requested it. His response? “No.”

When questioned about whether the president could legally fire him, Powell replied, “Not permitted under law.”

This tension between Trump and Powell isn’t new. Trump has been openly critical of Powell, particularly since the Fed raised interest rates in 2018—a move Trump believed could hinder economic growth and affect the stock market’s success.

Trump’s frustration largely stems from the Fed’s independence. Although the president has publicly called for rate cuts to support the economy, Powell has stayed committed to the Fed’s primary objectives: managing inflation and promoting job stability. Despite political pressure, the Fed remains focused on long-term economic health over short-term political goals.

So, if anyone is expecting a Trump presidency to automatically result in lower interest rates, it’s crucial to remember that the president doesn’t have direct control over the Fed.

While a president can influence economic policy through tax changes or deregulation, interest rates are under the Federal Reserve’s jurisdiction. The Fed acts independently, basing decisions on economic factors like inflation and employment rather than political influence. While the president appoints Fed members, the actual decisions around rates are up to the Fed itself.

Powell’s term as Chairman is set to run through February 2026, so if the tension continues, we could see further friction between him and Trump. It’ll be interesting to see how this dynamic plays out over time!

Huge Inflation Report This Week! 📅

The latest CPI inflation report has been a major driver of mortgage rate movements, and the next one lands this Wednesday, November 13th, for September’s data.

Currently, annual CPI inflation stands at 2.4%, right near the Fed’s target of 2%. If inflation readings exceed this 2.4% level, we could see mortgage rates swiftly climb back to 7% territory.

However, if inflation continues to trend lower, it’s likely we’ll see rates ease, potentially moving us out of the 7% range and providing some welcome relief.

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