How much power does a president really have over the mortgage rates that determine whether families can afford to buy their dream home? The answer might surprise you. While presidents often get credit or blame for rising or falling mortgage rates, the reality is much more complicated.
The Federal Reserve, not the president, actually controls the key interest rate that influences mortgages. Think of the Fed as the captain steering the ship of interest rates, while the president sits in a different part of the boat. The Fed makes independent decisions based on economic conditions, even if the president disagrees with their choices.
Mortgage rates depend heavily on something called Treasury bond yields, especially the 10-year bond. When investors worry about inflation or economic uncertainty, these yields go up, and mortgage rates usually follow. It’s like a financial dance where mortgage rates try to keep up with bond market moves.
Think of it as a financial dance where mortgage rates try to keep up with bond market moves.
However, presidents can still influence mortgage rates indirectly through their policies. When Trump won in 2016, mortgage rates jumped because investors expected his tax cuts and tariffs to increase inflation. These policies didn’t directly change rates, but they shifted investor expectations, which moved the market. Understanding this relationship requires analytical thinking similar to what businesses need when navigating digital transformation initiatives.
Historical examples show this pattern clearly. In 1980, mortgage rates soared above 16% despite the presidential election because inflation was the real problem. During the 2008 financial crisis, rates dropped dramatically due to Fed actions, not because of who won the election. In 2020, rates hit record lows below 3% mainly because the Fed responded to the pandemic.
Presidential policies like major spending programs or trade wars can create inflation fears that push rates higher. When investors think prices will rise faster, they demand higher returns on bonds, which pulls mortgage rates up too. The uncertainty during election periods often leads homebuyers and sellers to delay major decisions about purchasing or selling homes. Current mortgage rates are hovering near a 20-year high, close to 7%.
The bottom line is that while presidents influence the economic environment, they don’t directly control your mortgage rate. The Fed’s monetary policy decisions and broader economic forces play much bigger roles. So when rates change after an election, it’s usually because markets are reacting to expected policy changes, not presidential superpowers over interest rates.
