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Last updated on February 3rd, 2021 at 12:09 pm
Biden Administration is focused on affordability and accessibility in regards to the housing policy.
So far, Biden has proposed a $15,000 first-time homebuyer tax credit, financial help for renters, and reinvestment in fair housing policy, which can be confirmed once they pass through Congress first.
Some experts speculate that a Biden administration could help bolster homeownership for the middle class, but it would also result in higher mortgage rates.
But the biggest driver of low rates in today’s market is Covid.
Throughout 2020 the mortgage rates have pushed lower making home-buying more affordable and creating huge savings for refinancing homeowners.
Since low-interest rates make home buying and another consumer lending more affordable, stimulates the economy, and also reduces the massive interest cost represented by the national debt so in general, they receive the president’s support.
Presidents, however, do not set mortgage rates or any other interest rates. Neither does the Federal Reserve.
The biggest driver of record-low mortgage rates in 2020 has been the coronavirus pandemic.
Mortgage rates immediately rose following the news of the Adverse Market Refinance Fee, both for refinancing and purchase mortgages.
Originally set to begin September 1, the start date was pushed back to December 1. But that includes any loans not closed and delivered to Fannie or Freddie before the December 1 start date.
Because it takes to close a loan and deliver it to Fannie Mae, the Adverse Market Refinance Fee is already being applied to new refinance loans.
In any case, unless the Biden Administration decides to kill the Adverse Market Refinance Fee, it will mean slightly higher rates on conventional refinance loans and likely home purchase loans as well.
Homeowners mortgage refinancing with a government-backed FHA, VA, or USDA loan may not be affected.
Biden has raised the idea of a renter’s tax credit that will limit rental and utility costs to 30 percent of an individual’s household income.
The goal is to protect renters from excessive housing costs and leave more room in their budgets for daily necessities and putting away savings.
This proposal and the $15,000 tax credit for first-time buyers would require congressional approval and be part of a larger debate.
One of the major forces in keeping mortgage rates down has been the Fed’s low-rate policy and buying of mortgage-backed securities during the pandemic.
For now, there’s no reason to believe the Biden Administration would change the Fed’s course on this matter.
The Trump Administration has recommended that Fannie Mae and Freddie Mac should be privatized. Shareholders and the government will debate the matter in this session of the Supreme Court.
However, this seems unlikely for several reasons.
- Because Fannie Mae and Freddie Mac each have enormous assets. They have sent almost $110 billion to the Treasury since 2008.
- The tinkering with Fannie Mae and Freddie Mac could result in higher mortgage rates, perhaps a full percentage higher.
This could deter homebuyers and refinancers and slow the record year for U.S. homeownership.
In the end, much of what the new Biden Administration does or does not accomplish will depend on who controls Congress, which would be in January.
For now, mortgage rates continue to hover near all-time lows, which means increased affordability for homebuyers and huge savings for refinancers who have good credit and a fair bit of equity.
Since rates rest on the economy, we can expect these low mortgage rates to continue until we see a bigger shift toward the post-pandemic period.
Reference Source: The Mortgage Reports
