What should home buyers and homeowners expect from Biden?
In housing policy, the Biden administration focuses on affordability and accessibility.
So far, Biden has proposed a first-time home buyer tax credit of $ 15,000, financial assistance for tenants, and reinvestment in fair housing policies.
Of course, none of these changes are guaranteed. You have to pass Congress first.
And some experts have speculated that while a Biden win could help boost home ownership for the middle class, it could also mean higher mortgage rates.
With COVID still the biggest driver of low interest rates in the market today, any predictions in this regard are far from certain.
Find and Lock a Low Mortgage Rate (Nov 11, 2020)
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What does Biden's profit mean for mortgage rates?
Mortgage rates continued to fall over the course of 2020, making home purchases more affordable and creating huge savings for homeowners on refinancing.
In general, presidents support low rates. In part, this is because rock bottom interest rates make home purchases – and other consumer credit – more affordable and stimulate the economy.
But presidents also like low interest rates because they lower the massive interest costs of national debt.
Last fiscal year (FY2020, which ended September 30), interest on government debt cost taxpayers $ 522 billion.
Presidents do not set interest rates
While Biden and Trump disagree on almost everything, they undoubtedly share some views regarding interest rates.
However, presidents do not set mortgage or other interest rates. Neither does the Federal Reserve.
In fact, the coronavirus pandemic was the biggest driver of record-low mortgage rates in 2020.
Presidents do not set interest rates. If you want to know what will happen to mortgage rates, keep a close eye on the COVID pandemic and the progress of new vaccines.
Massive uncertainty and a recession depressed interest rates through 2020 and kept them low.
As we've said for a while, an effective COVID vaccine could turn the tide.
And we saw rates spike earlier this week when Pfizer announced the success of its previous vaccine trials.
However, we are still a long way from having a vaccine available for the general public or a normal life.
As long as the economy is in recovery mode, we can probably expect mortgage rates to continue in a range near or below 3%.
Find and Lock a Low Mortgage Rate (Nov 11, 2020)
Refinancing rates: The disadvantageous market refinancing fee is still looming
In August, a new fee of 0.5 percent was announced for homeowners looking to refinance from late 2020. The fee would apply to mortgages sold to Fannie Mae and Freddie Mac.
Mortgage rates rose immediately after the news of the reverse market refinance fee, both for refinancing and buying mortgages.
Originally set for September 1st, the start date has been moved to December 1st. However, this includes any loans that were not closed and delivered to Fannie or Freddie before the December 1st start date.
The adverse market refinancing fee is already being applied to new refinancing loans as a loan needs to be closed and delivered to Fannie Mae.
The purpose of the new fee, the government said, was to replenish Fannie Mae and Freddie Mac with new reserves of $ 6 billion and protect them from increased risk from COVID.
What wasn't said was that the government had already transferred nearly $ 110 billion from the companies to the Treasury Department since 2008, money that could have been used for reserves.
In any case, unless the Biden administration decides to remove the reverse market refinancing fee, this means slightly higher interest rates for conventional refinancing loans – and probably also for home purchase loans.
Homeowners refinancing with a government-sponsored FHA, VA, or USDA loan may not be affected.
Check your refinancing rates. Start Here (November 11, 2020)
Biden's tax credit of $ 15,000 for first-time buyers
Biden has promised to apply for a $ 15,000 tax credit to help bring more first-time buyers to market. This is similar to a 2008 plan that resumed the property market after the mortgage collapse in 2006-2008.
The tax credit would directly benefit younger, first-time, and minority home buyers who have traditionally found it harder to get into the real estate market.
Unlike the 2008-2010 first-time home buyer tax credits, Biden's proposed credit would be preferable – which, as stated on Biden's website, means that home buyers will receive the tax credit when they make the purchase rather than waiting for assistance when You collect taxes the following year. "
The chances of getting such a loan seem good as real estate markets in all states would become more active.
Potential home buyers currently excluded from the market could begin building equity and financial security – which benefits entire communities.
However, the first time purchaser tax credit of $ 15,000 is not guaranteed. It would have to be passed by Congress, which controls US tax policy.
Tax credit for tenants from Biden
Similarly, Biden has brought up the idea of a tax credit for a tenant that limits rental and utility bills to 30 percent of a person's household income.
The aim is to protect tenants from excessive housing costs and to leave more space in their budget for daily needs and to avoid savings.
That proposal – and the $ 15,000 tax credit for first-time buyers – would require Congressional approval and be part of a larger debate.
Biden and the Federal Reserve
The Federal Reserve is headed by a seven-member Board of Governors. Two seats are currently vacant – although they may be filled with Trump nominees before the end of the year. The remaining five seats are occupied by four Republicans and one Democrat.
During his presidency, Biden will have the opportunity to fill five directorships. He will also have the option to nominate a new Fed chairman to replace Jay Powell.
The result could be a Federal Reserve that has a lot more interest in jobs and unemployment and is less concerned about inflation.
The Fed was one of the main forces keeping mortgage rates low in 2020, and we can expect that trend to continue into 2021.
While the Federal Reserve doesn't control mortgage rates, its actions can have a huge impact on them.
The Fed's low interest rate policies and buying mortgage-backed securities during the pandemic were one of the main forces keeping mortgage rates low.
Given the current political stance, we can assume that the Fed will keep rates low until at least 2021. This will likely contribute to low mortgage rates as well.
There is currently no reason to believe that the Biden administration would change the Fed's course on this matter.
Check your new plan (November 11, 2020)
What will happen to Fannie Mae and Freddie Mac?
In 2008 the government placed Fannie Mae and Freddie Mac under a conservatory. This is a quirky term that means the government has taken over both companies.
Now, 12 years later, the new government faces what to do with Fannie and Freddie.
The Trump administration has recommended that Fannie Mae and Freddie Mac be privatized. Shareholders and the government will consider the matter at this Supreme Court session.
However, this seems unlikely for a number of reasons.
First, because Fannie Mae and Freddie Mac each have enormous assets. It was cash cows that have sent nearly $ 110 billion to the Treasury Department since 2008, money that has made up for annual deficits.
Second, there's a real concern that tinkering with Fannie Mae and Freddie Mac would simply lead to higher mortgage rates – maybe a full percentage higher.
This could scare off home buyers and refinancers and slow the record year we've seen for US home ownership.
Look for the new administration to replace the current leadership of the Federal Housing Agency (FHFA) on a large scale.
Also, be sure to withdraw any privatization plans until the matter can be further investigated.
COVID-19 is still a major driver of interest rates
Above all is COVID-19.
At the time of this writing, we have the announcement of major advances in a vaccine. If it's safe and effective, it will mean a big change.
Regardless of how well it will take months to get an extensive vaccination program in place. There are now more than 100,000 cases per day. New hospitalizations and deaths will follow.
Will the new government have widespread support for a faster fix, the use of masks, social distancing and hand washing?
For example, in Taiwan, a low-tech approach to virus control meant "200 days with no domestically transmitted cases of COVID-19," according to Voice of America.
If the US adopts stricter practices under a new administration, there could potentially be a decline in cases and, ultimately, a broader return to "normal" (or whatever the new normal is).
That may be bad news for mortgage rates, but it would be a big win for Americans and the economy.
In the end, much of what the new Biden administration does or not depends on who controls Congress.
The house is firmly in democratic hands. However, we won't know until January – after the runoff elections in Georgia – whether the Senate is controlled by Democrats or Republicans.
In no case is the Senate's support for Biden's policies automatic or assured. We'll know a lot more by January.
Currently, mortgage rates are still near the all-time lows.
Despite a small spike following news of a possible COVID vaccine, rates are still in the 3% range.
This means greater affordability for home buyers. And it means huge savings for refinancers – especially those with good gredit and adequate equity.
With interest rates dependent on the economy rather than the presidency, we can probably expect these low mortgage rates to continue until we see a much bigger shift towards a post-pandemic recovery.
Check your new plan (November 11, 2020)