Mortgage rates are a pretty complex subject.
They’re also commonly misunderstood and oversimplified, with many myths perpetuated by those who work in the industry.
Some folks think that when the Fed cuts rates, mortgage rates fall by the same amount.
Others might believe the government somehow sets the rates and then lenders offer them accordingly.
The fact of the matter is that none of this is true. Ultimately, mortgage rates are set by the market, just like many other things you buy.
Does the President Set Mortgage Rates?
The short answer is no.
When it comes to mortgage rates, there is a supply and demand dynamic, just like other goods.
With regard to mortgage pricing, it is appetite for mortgage-backed securities (MBS) that drives rates higher or lower.
Simply put, if there is more investor demand, MBS prices go up and rates can come down.
If there isn’t a lot of demand, MBS prices fall and rates must increase to bolster purchases.
This all speaks to the market determining the direction of rates.
So where does the president of the United States figure into all of this?
Well, you could argue that the president definitely plays an indirect role in where rates go because they are driven by the economy.
However, there’s not a direct order by President Biden or President Trump saying rates should be X so they go to X.
Instead, these presidents can set policies that directly affect the economy, and thus indirectly affect interest rates.
Trump Said He Wants Lower Mortgage Rates, But His Policies Might Have the Opposite Effect
Some economists have actually expressed concern lately that some of President-elect Trump’s proposed policies will increase inflation.
Things like tariffs and tax cuts could prove inflationary and raise prices on consumer goods.
That could also lead to higher mortgage rates in the process since inflation is not a friend to bonds.
To that point, a sitting (or in this case incoming) president could technically affect mortgage rates.
But again, it’s more of an indirect effect.
Trump has made it clear that he wants mortgage rates to be lower, despite what that might do for the housing market, which is already inventory-deprived.
We don’t really need more demand at the moment, we need more supply.
Stoking demand by lowering rates wouldn’t necessarily be in the best interest of most people, namely renters.
Though it would help those who recently took out a home loan at a much higher rate since they could make a rate and term refinance pencil a lot better.
It’s also important to note that what a president says and what they actually deliver are two very different things.
And promises are difficult to keep when there are many outside forces along with independent economic data driving policy.
Could a President Take a More Direct Role on Mortgage Rates?
The caveat is that a president could get a little bit more aggressive if they were to intervene with the Federal Reserve directly or reinstate a program like Quantitative Easing (QE).
There was talk about Trump wanting to set rates himself and/or replace Fed chair Jerome Powell.
In that regard, he could take a more direct approach to setting monetary policy and attempting to manipulate mortgage rates. But that might be unlikely.
A more realistic way to push mortgage rates lower would be via another round of QE, which was the government MBS buying program that led to a ton of demand for mortgages and much lower interest rates.
Arguably, a president could make a case for this but they would still need support and a good argument to do so.
But a direct order from the president to make the 30-year fixed X percent just isn’t in the cards.
The President Has Indirect Power Over Mortgage Rates, at Best
To summarize, the simplest way to look at this is that the U.S. president has an indirect influence on mortgage rates.
I will say that mortgage rates have gone up a ton recently in anticipation of the incoming administration.
So there’s been a lot of speculation based on Trump becoming the next president.
Which again is indirect because Trump would actually want the opposite to happen.
But it does show you the power a president has in terms of influence and expectations.
If you’re trying to track mortgage rates, though, it might be better to continue to look at the economic data instead of the proposals being thrown out on a weekly basis.
Or the supposed impending trade wars and tax cuts and the like.
Ultimately, bond traders will continue to care most about economic data to drive their decisions.
And if the data show the economy weakening, chances are mortgage rates will move lower under President Trump.
But if the economy shows strength, or if inflation looks like it’s reigniting due to the new administration‘s policies, rates will likely rise.
The key takeaway here is that no one individual sets mortgage rates whether it’s the president of the United States (POTUS), Federal Reserve chair, or Treasury secretary.
It is the free market that determines mortgage rates just like anything else.
Read on: Does the Fed control mortgage rates?
Before creating this site, I worked as an account executive for a wholesale mortgage lender in Los Angeles. My hands-on experience in the early 2000s inspired me to begin writing about mortgages 18 years ago to help prospective (and existing) home buyers better navigate the home loan process. Follow me on Twitter for hot takes.