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Does the president affect mortgage rates?

Most Americans would probably like to see lower mortgage rates these days. And while the president certainly has a lot of power, even he can’t snap his fingers and make mortgages cheaper for today’s borrowers. What can the president do about mortgage rates, though? Here’s how who’s in office could impact what you pay for a mortgage loan.

The president of the United States doesn’t directly control mortgage rates. They don’t have the authority to set industrywide interest rates, nor can they legally require lenders to set their rates in a certain manner.

The president does, however, influence rates to some extent. Their appointees, policies, and public statements can affect the 10-year Treasury yield, and mortgage rate trends tend to follow the 10-year yield. They also have a hand in policies that can impact the costs lenders face, and their decisions influence economic factors such as inflation, labor, housing, taxation, and Federal Reserve decisions, among others — all of which play into the interest rates paid by consumers.

The Federal Reserve plays a big role in interest rates. The federal funds rate — which is the rate banks pay to borrow money from each other — is the foundation on which most consumer interest rates are based.

Just think: If a bank is paying more to borrow money, they’ll need to charge customers more as well. Therefore, when the Fed increases its federal funds rate, the rate on most consumer products also tends to rise. When it falls, consumer rates — including mortgage rates — often follow suit.

(Lately, this effect is seen in the weeks preceding an anticipated Fed rate cut, with mortgage rates falling in anticipation of a lower Fed rate, not necessarily after.)

How exactly does the president play a role in all this, though? First, the president nominates the Fed’s chair — the person who reports to Congress on behalf of the Fed, meets with the Treasury secretary, and provides post-meeting commentary to the public. They also nominate the members of the Fed’s Board of Governors.

Both parties play a significant role in shaping the Fed's actions and policies. Although the Senate must ultimately confirm the president’s nominations, it does grant the sitting president some influence over interest rates.

Learn more: How does the Federal Reserve rate decision impact mortgage rates?

Another significant influencer on mortgage rates is the 10-year Treasury yield, which represents the rate at which 10-year Treasury bonds are being paid to investors. Long-term mortgage rates tend to move in the same direction as the 10-year yield, so when the Treasury yield is up, mortgage rates typically also rise. When the yield falls, so do rates.

As with the fed funds rate, the president doesn’t directly influence the Treasury yield. However, the moves made by their Fed appointees, as well as their own public statements, remarks, and policy priorities, do factor in.

Why? Because all of these can heavily influence investor sentiment. For example, if investors fear economic trouble is brewing, they’ll be more tempted to buy into the safety of government bonds, which sends demand for Treasurys up and yields down.

A more stable economy and strong feelings of financial security can have the opposite effect, drawing investors away from Treasurys and into riskier investments. Treasury rates then rise to attract more investment.

The president’s economic policies also have the power to impact the mortgage rates you see. Tax cuts (or increases), for example, affect the amount of pocket money Americans have and, therefore, how much they can contribute to the economy. This directly contributes to inflation and the Fed’s decisions about interest rates.

Other economic policies, such as tariffs, come into play, as they influence the prices consumers pay for various goods and services and, as a result, Americans’ spending and the U.S. inflation rate.

Generally speaking, when inflation is high, the Fed tends to increase rates to tamp down economic activity. When it’s low, it may opt for rate cuts instead. This keeps consumers borrowing and money flowing into the economy.

Dig deeper: How inflation affects mortgage rates

Policies that impact home prices, housing, or supply and demand are another way the president can have a hand in mortgage rates.

Typically, when home buyer demand or housing prices are high, mortgage lenders increase the rates they charge customers. When demand is low or supply is oversaturated, they may lower rates to drum up more business.

Potential policies that could impact supply and demand include:

Tariffs, as they impact the costs home builders face for materials
Homebuilding initiatives, such as former President Biden’s Housing Supply Action Plan
Homebuying incentives, like the proposed First-time Homebuyer Tax Credit
Affordable housing initiatives, which impact what buyers pay for their homes

Even seemingly unrelated policies can impact the housing industry and indirectly affect mortgage rates. Immigration policies, for example, can have a trickle-down effect, particularly if they significantly impact the availability or cost of labor for homebuilders.

Despite recent declines, most buyers and refinancers would probably like to see mortgage rates creep a little lower. Fortunately, waiting for policy changes or Federal Reserve moves isn’t your only option.

In fact, there are several strategies you can use to get a lower mortgage rate all on your own. Here are some options:

Increase your credit score: Mortgage lenders usually reward higher credit scores with better interest rates, because a high score communicates that you’re more likely to make your payments. To improve your score, pay down your debts, make on-time bill payments, and keep your oldest accounts open to increase your credit age.
Buy discount points: Buying mortgage discount points essentially means purchasing a rate reduction. You pay a set fee per “point” at closing, which directly lowers your mortgage rate by a fractional amount. You’ll enjoy this lower rate for your entire loan term.
Consider a temporary rate buydown: This is similar to buying points, though the lower rate only lasts for a few years or less. You may receive a lower rate for the first one, two, or three years of the loan, after which your rate will revert to your originally quoted rate (or you can refinance). While you may have to pay for the buydown, this cost is often covered by the seller, lender, or homebuilder.
Shop for the best mortgage lender: Rates vary by mortgage lender, so be sure to obtain quotes from at least three or four lenders. According to Freddie Mac, getting quotes from at least four lenders can save you over $1,200 per year.

Making a larger down payment can also help you get a lower interest rate, but be careful about dipping too much into savings. You’ll want a solid emergency fund on hand to cover repairs and home maintenance needs as they arise.

Mortgage rates are determined by several factors, including Federal Reserve policy, inflation, the employment market, economic growth, and the 10-year Treasury yield. Your individual credit score, down payment, debts, and other financial factors also play a role.

Mortgage rates often drop when inflation falls, home-buying demand slows, the economy cools, or 10-year Treasury yields decline.

The 3% mortgage rates seen during the peak of the COVID-19 pandemic were a result of extreme actions taken by the Federal Reserve, which lowered the federal funds rate to near zero to stimulate economic activity. Unless another economic crisis of this magnitude occurs, super-low rates like these are unlikely to be seen in the future.