Will the Election Affect Investment Interest Rates?

2024 is ramping up to be an interesting year. With the election looming, how will this affect interest rates? This is something that any property investor or purchaser will be keen to understand. 

Of course, making predictions is never an exact science. However, one thing’s for sure. When it comes to the world of real estate, then it’s probably time to buckle up for a rollercoaster ride…

From the Election to Global Turmoil: The Lowdown on Investment Interest Rates 

• Ukraine, residual pandemic effects, Gaza, the election…
• Predictions on how these and the election will affect investment interest rates

Ukraine, residual pandemic effects, Gaza, the election…

While asking “Will the election affect investment interest rates?”, is a wholly relevant question, the current financial playing field is far, far bigger than this in isolation.

Let’s look at what are (or potentially are) the four of the greatest drivers of how the real estate market might react in the short to mid-term.

• The upcoming election: The (currently) decreasing interest rates—which are now on a solid downward trajectory after the eye-watering peak of 8% last year, are likely to be impacted by whoever ends up seated in the Oval Office. Up until the impending vote, the Federal Reserve will continue to do what it can to boost the economy. Therefore, it’s highly likely we’ll continue to see interest rates coming down. If former president Trump retakes his place in the White House? Well, with his recent comments about replacing Jerome Powell, interest rates could end up remaining static or even rising slightly.
• The lock-in effect: The high interest rates of recent years have prevented many people from moving. If you’re locked into a low mortgage rate, it simply doesn’t make financial sense to sell and borrow money on another property for a higher rate. However, if interest rates continue to fall—in the short term, at least—we’ll probably see more real estate hit the marketplace. And if interest rates are favorable, then investors are more likely to get the sweet deal they need.
• Remote working is now a thing: While the Pandemic created a nation of remote workers, the legacy it leaves is a whole new ball game. Millions of US citizens are now happily working from their home offices. This allows them to live wherever they want—not simply within commuting distance of an employer’s site. The move away from the traditional city landscape (NY, LA, etc.) to satellite cities and more rural areas continues. Falling interest rates make this even more attractive in the coming months.
• World conflict: Gaza, the Red Sea, Ukraine… These current conflicts and potential escalation could all have negative effects on US interest rates. Other curve balls that we simply can’t accurately predict, such as climate change, for example, could all punch a hole through the most accurate of forecasts about interest rates and more.

Predictions on how these and the election will affect investment interest rates

Taking all of the above into account, we can reasonably expect interest rates to continue dropping at least a small amount in the short term. The run-up to the election might see this level off, with a static period up until the votes come in.

If Biden remains in office, then, potentially, interest rates could stay the same or continue to fall. If Trump hails supreme…? Then there’s real potential for a small or even larger rise over the coming months.

This is all, however, crystal gazing. With the best will in the world, economists can predict but not guarantee what’s likely to happen. If we then have to deal with an unexpected turn of events, then the whole foreseeable future could change. 

The best advice for real estate investors right now is to take full advantage of the reduction in interest rates that we’re currently enjoying. Accept that the days of rock bottom rates are over and that paying 6% or 7% is the new normal. Sinking funds into bricks and mortar is likely to prove a shrewd investment move. Whether you’re in it for a fast buck or the longer term, real estate has always—and is likely to continue—to be a sound area of future wealth planning.

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