When this big change takes place this Wednesday on White House Inauguration Day, what will it mean for America’s other homes – and the mortgage rates used to fund it?
When the country started in 2020, the fixed interest rate loan of 30 years averaged 3.72%. Since then, the mortgage rate has hit historical lows more than a dozen times and ended last year at a breathtakingly low average of 2.67%, according to mortgage giant Freddie Mac.
A drop that can be as large can mean huge savings on a loan as large as a mortgage.
Thirty-year mortgage rates fell again in early January to an average of 2.65%, although they have been creeping up recently.
Prospective homebuyers, and homeowners who have yet to refinance to lower rates, are looking for any clues as to where the mortgage rate could rise once Joe Biden becomes president.
This is what forecasters expect.
Why rates under Biden may rise
Do not expect mortgage rates to rise once Biden takes the oath, but his government may eventually influence its direction.
“Expect tax rates to rise, the Fed to offset rising inflation with higher rates, and the economy to slow down,” Guy Baker, founder of the Wealth Teams Alliance, told The Mortgage Reports.
And there’s it from Rick Sharga, executive vice president at RealtyTrac: ‘Biden has called for more government investment in affordable housing, which can be funded in part by proceeds from home sales fees, backed by government agencies such as Fannie Mae, Freddie Mac, and the FHA. ‘
Baker, Sharga and other experts who surveyed The Mortgage Reports in October predicted that the thirty-year rates in 2021 under Biden would climb to an average of 3.51%.
Why rates may not do much this year
Other forecasts expect only modest increases this year. Just last week, Freddie Mac predicted that the 30-year fixed mortgage rates in 2021 would average just 2.9%, and Fannie Mae – another government-backed mortgage company, such as Freddie Mac – said rates at the end of average would be only 2.8%. this year.
Yet recent weeks have brought more warnings about the possibility of rising rates, after two U.S. Senate elections in Georgia gave Biden Democratic majorities in both houses of Congress. It could mean more government spending – and government – lend, which would put pressure on interest rates.
But presidents have just as much influence on the mortgage rate. Remember, the Federal Reserve is still planning to keep a core interest rate near zero until at least 2024, and the pandemic will still have an impact.
If the COVID crisis still looks awful, investors could take money out of equities and throw it as a safe haven in treasury bonds. This would result in the yields (interest) on the treasury falling, and the mortgage rates usually followed the same path.
How to land low rates in 2021
Nevertheless, as rates rise under the new president, lenders will have to use some not-so-secret methods to clean up the cheapest mortgage loans possible.
First, you want to make sure that your credit score is in a tip-top shape, or that you are never offered a very low rate.
Then you need to look around to find the best mortgage rates as it may vary from one lender to another. Research by Freddie Mac has found that lenders can save thousands of dollars by comparing at least five rate offers, instead of saying yes to the very first offer.
If rates do start to rise, a homebuyer or refinancer can offset higher borrowing costs by saving money on homeowners insurance. With a little comparison, you can lower the annual price of your coverage by hundreds of dollars.