When this big change takes place at the White House on Wednesday, the day of the inauguration, what will this mean for the other houses in America – and the mortgage rates used to finance them?
When the country entered 2020, 30-year fixed-rate home loans averaged 3.72%. Since then, mortgage rates have hit historic lows more than a dozen times and ended last year at an incredibly low average of 2.67%, according to mortgage giant Freddie Mac.
Such a big decline can mean big savings on a loan as big as a mortgage.
30-year mortgage rates fell again in early January, to a record 2.65% on average, although they have recently risen.
Potential buyers and homeowners who still need to refinance to cut rates are looking for clues as to where mortgage rates might go after Joe Biden becomes president.
Here’s what meteorologists are anticipating.
Why rates may rise under Biden
Don’t expect mortgage rates to change the moment Biden takes the oath of office, but your government may eventually affect your direction.
“Expect tax rates to rise, the Fed to compensate for rising inflation with higher rates and for the economy to slow down,” Guy Baker, founder of the Wealth Teams Alliance, told The Mortgage Reports.
And there is this, from Rick Sharga, executive vice president of RealtyTrac: “Biden asked for more government investments in affordable housing, which could be financed in part by fee income linked to home sales supported by government agencies like Fannie Mae, Freddie Mac and the FHA. “
Baker, Sharga and other experts consulted by The Mortgage Reports in October predicted that 30-year rates would rise to an average of 3.51% in 2021 under Biden.
Why rates may not do much this year
Other forecasts point to only modest increases this year. Last week, Freddie Mac predicted that 30-year fixed mortgage rates will average just 2.9% in 2021, and Fannie Mae – another government-sponsored mortgage company like Freddie Mac – said the rates they would be on average only 2.8% at the end of this year.
Still, the past few weeks have brought more warnings about the potential for rate hikes after two run-off elections to the US Senate in Georgia gave Biden Democratic majorities in both houses of Congress. That could mean more government spending – and the government borrow, which would put pressure on interest rates.
But presidents have limited influence on mortgage rates. Remember that the Federal Reserve is still planning to maintain a basic interest rate close to zero until at least 2024, and the pandemic will continue to have an impact.
If the COVID crisis continues to look terrible, investors can withdraw money from stocks and pour it into Treasury bills as a safe haven. This would cause yields (interest) on Treasury bills to sink, and mortgage rates generally follow suit.
How to get low rates in 2021
Still, if rates go up under the new president, borrowers will need to use some less-than-secret methods to sniff out the cheapest mortgages possible.
First, you will want to make sure that your credit score is in great shape, or you will never have a very low rate.
Then, you should search to find the best mortgage rates, as they can vary from one lender to another. A Freddie Mac survey found that borrowers can save thousands of dollars by comparing at least five rate quotes, rather than saying yes to the first offer.
If rates start to take off, a home buyer or refinancer can offset higher borrowing costs by saving money on home insurance. With a small price comparison, you could reduce the annual price of your coverage by hundreds of dollars.