Generally speaking, the markets (take your pick… stock, bond, currency, whatever) don’t like uncertainty. And generally fixed-income markets, including those that involve mortgage-backed securities, sell off pricewise and go up rate-wise. With President Joe Biden announcing that he will not run for re-election in November, there is uncertainty. Kamala Harris is not a shoo-in to be the nominee although, as of this writing, other Democrats are coming out saying they will not challenge her. And of course, the VP role is anyone’s guess. How does this news impact Orion’s client’s borrowers?

‍

Financial analysts are scrambling to look at Harris’ history in terms of being anti-corporate, pro-regulation, and so on. None of this really helps borrowers anywhere, and, in fact, much of it increases the cost of residential lending. These costs, as you would expect, are passed on to borrowers everywhere.

‍

Fortunately, Orion’s brokers know that mortgage rates have come down. Interest rates for the most popular 30-year fixed mortgage averaged around 6.76% in May 2024, 6.07%for 15-year, according to Zillow data. Of course, mortgage rates are always changing, and there are a lot of factors that can sway your interest rate besides the political climate. Some of them are personal factors you have control over, and some aren't. This is where brokers can add value.

‍

Most experts believe that mortgage rates will go down in 2024, though we may not see rates drop until later on in the year. If you have a client that is thinking about buying a home, and find the right one, there is little point in holding off buying because rates may drop in the coming months.

‍

Brokers know that mortgage interest rates vary by borrower because the nuances are based on personal factors. Politics and the actions of the Federal Reserve can influence them, but Orion and experienced brokers find it best to focus on the items that we can control and change. Key determining factors that your client has control over include credit score, the debt-to-income ratio, the amount of the payment, the type of mortgage, and the length of the term. A good broker can add value by helping with those!

‍

No matter how good your client’s finances are, they won't be able to get a rate that's dramatically lower than average. Rates are determined in large part by economic trends and how those trends affect investor demand for mortgage-backed securities. When there's a lot of economic growth, mortgage rates typically group. In recent years, high inflation has pushed mortgage rates up. When grow this cooler, rates often go down. When the U.S. Federal Reserve raises or lowers the federal funds rate (the rate at which commercial banks borrow and lend their excess reserves to each other overnight), mortgage rates can move up or down as well based on how investors believe Fed changes will impact the broader economy.

‍

With over three months until the election, a lot can happen. There’s still a lot of headline risk. We still have over three months until the actual election, and while, Orion’s management, AEs, and staff are just trying to do their jobs and help you help your borrowers.

‍