November Mortgage Outlook: Rates Wait on Election Result

While presidential ballots are being tallied and argued about, mortgage rates tend to sit still and wait. So rates are unlikely to move much in November until the result of this year's presidential election is clear and broadly accepted — even if it takes time to reach a consensus.

The elections of 2000 and 2020 offer examples for what we might see in the 2024 go-round.

In 2000, the outcome of the election depended on the result in Florida, where razor-thin margins led to five weeks of recounts and lawsuits. According to Freddie Mac, the 30-year mortgage rate stayed between 7.73% and 7.79% for the first three weeks of that saga before dropping to 7.54% in December, in the week before the Supreme Court stopped the vote recounts in Florida.

In 2020, it took four days for the TV networks and the Associated Press to conclude that Joe Biden had won the election. But Donald Trump didn't concede, injecting uncertainty into the proceedings. In the 12 weeks from Election Day to the inauguration, the 30-year mortgage remained in a rather tight range: as high as 2.84% and as low as 2.65%. It averaged either 2.71% or 2.72% for four weeks in a row.

November's mortgage rate forecast is for rates to remain relatively unchanged until doubt has evaporated. The direction of mortgage rates is anyone's guess after that, depending on who wins the White House and which parties will control the House and Senate.

What happened in October

At the end of September, NerdWallet writer Kate Wood noted that mortgage rates had fallen for five months in a row, "but October could break the streak." That's what happened, which is good for her forecast record but bad for borrowers. In NerdWallet's daily survey, the 30-year mortgage rate rose about 60 basis points (a basis point is one one-hundredth of a percentage point). It averaged 6.75% in the last week of October in NerdWallet's survey, compared to 6.16% in the last week of September.

October's rise in mortgage rates threw a wet blanket over the market. "After a brief burst of activity in September when rates were almost 60 basis points lower, overall applications have declined 27%, driven by a pullback in refinances," said Joel Kan, deputy chief economist for the Mortgage Bankers Association.

Fed and mortgages moved in opposite directions

It seems odd that mortgage rates rose so much in October, given that the Federal Reserve cut short-term interest rates by half a percentage point on Sept. 18. Normally, you would expect the two interest rates to walk in the same direction, instead of running away from each other. So what happened?

The Fed justified its rate reduction by noting that job gains had slowed and inflation had been falling toward the central bank's 2% goal. That was true at the time of the Fed meeting. But then, a couple of weeks afterward, two economic reports were released that contradicted the Fed's confident analysis:

• Inflation ticked up to 2.7% in August from 2.6% in July, as measured in the Fed's favorite inflation gauge, the core PCE price index. Markets had been expecting this. Nevertheless, inflation moved in the wrong direction.

• Nonfarm payroll jobs grew by 254,000 in September, the most vigorous growth since March. This result surprised markets, which had expected slower job growth.

Healthy job creation can fuel inflation — and mortgage rates are sensitive to inflation. So the news of the robust economy was followed by a month of rising mortgage rates.

The Fed is expected to continue moving in the opposite direction by cutting short-term interest rates a quarter of a percentage point when it meets Nov. 6 and 7. But look for the Federal Reserve's action to be overshadowed by the election's aftermath.

What other forecasters predict

Forecasts from Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors all imply that mortgage rates will fall in the final three months of this year and gradually decline all next year. The three organizations predict that the 30-year mortgage will average 6% to 6.3% from October through December, and to settle below 6% in the final three months of 2025.

As of the end of October, the 30-year mortgage has averaged 6.43% in the fourth quarter. For the predictions of lower rates in the fourth quarter to pan out, mortgage rates would need to fall decisively in November and December. Time is running short for that to happen.