Today, Donald Trump will be sworn in as President of the United States.
Consumers have no doubt heard of rising mortgage rates since Trump's unexpected win in November.
From peak to trough, mortgage rates rose nearly 100 basis points (1.00%) since their 2016 lows in July.
It's the first time the 30-year fixed conventional mortgage has been solidly above 4% since mid-2015, according to Freddie Mac data.
Home buyers and refinancing homeowners wonder if this is just the beginning for mortgage rate increases. Will they be priced out of the housing market -- or see their refinance savings dwindle to nothing -- under the Trump administration?
And, how will the housing market fare after changing of the guard?
Fortunately, there are many reasons to believe mortgage rates will be tempered and the housing market will remain strong in 2017 and beyond.
As a mortgage consumer, 2017 could be one of the better years to lock in a rate or buy a home.Click to see today's rates (Jul 24th, 2017)
Mortgage rates hit bottom in 2016 (again) despite Wall Street predictions to the contrary.
Analysts and mortgage forecasters alike got it wrong. Last year was an era of falling rates.
That's good news for 2017 home buyers. Rates in the 3s -- available last summer -- have ignited "should have" sentiments in buying and refinancing consumers.
But rates increase started from a low point. Today's rates are still historically near-bottom.
Freddie Mac reports that the 30-year fixed conventional loan rate stands at just over 4%, falling each week thus far into January. Compared to the 8.25% average during the last forty-five years, rates are currently at a discount.
Mortgage rates for non-conventional loans are even cheaper.
Among the loan types still available with rates in the 3s are the FHA home loan, USDA mortgage, and VA home loan program.
These three loan types come with an implicit government guarantee. That strong backing allows lenders to issue loans with looser requirements and at lower rates.
Mortgage software provider Ellie Mae reports that the average VA home mortgage was issued at just 3.76% in December, compared to the conventional loan average of 4.14%.
USDA loan rates are similar to those of VA, and FHA mortgage rates ring in just slightly higher.
Low-rate opportunities still exist for today's mortgage shopper, but will that change under Trump? Here are four ways mortgage rates may change this year.Click to see today's rates (Jul 24th, 2017)
The Federal Reserve, informally knows as "the Fed", is the single most powerful financial body in the world.
Its dual mandate is to prop up employment in the economy while keeping inflation around two percent annually.
It achieves these goals by raising and lowering its Federal Funds Rate, among other things.
The Fed has remained surprisingly autonomous over the years -- meaning congress and the President himself has had little influence over its actions.
However, Fed members themselves can be changed, and that's the job of the current administration.
Current Federal Reserve Chair Janet Yellen has overseen an era of accomodative Fed policy that helped keep mortgage rates low. Her position expires in February 2018, at which point Trump will seek a replacement.
Two other spots within the Fed are up for grabs, too.
These position changes could lead to higher rates -- but lower rates are not ruled out, either.
Donald Trump suggested Yellen was keeping rates artificially low to prop up Barack Obama's report card as President, according to Bloomberg. But things said on the campaign trail don't always end up as policy.
The Fed has less influence over long-term mortgage rates than most consumers think. Even if the Fed raises its benchmark rate three times in 2017, as it predicts, mortgage rates will not likely increase nearly as much -- or at all.
Consumers should have access to low rates despite Trump's repositioning of the Fed through 2017 and 2018.
Infrastructure spending, taxes, and mortgage rates don't appear to have much in common, but in this case, they do.
Trump plans to spend an estimated $1 trillion on infrastructure spending, including roads, bridges, harbors, electricity, and everything in between, according to political website The Hill.
Simultaneously, the administration seeks to lower taxes, allowing those making less than $225,000 per year to keep 3% more of their income.
These plans could drive up mortgage rates.
The U.S. government must borrow to push forward financial plans such as these. The way the government borrows is by issuing bonds.
Mortgage rates are driven by a type of bond -- mortgage-backed securities. While not the same as government bonds, a market flooded with bonds of any kind will drive up interest rates.
When the supply side goes up, relative demand goes down. Interest rates must increase to make it worth investors' time to buy bonds.
But even in this scenario, rising rates could be offset by rising incomes and employment opportunities across the country.
New infrastructure spending would make the job market even tighter than it is now: unemployment is near 5% which is considered near-full employment.
Employers would need to pay more to retain workers. Those who have jobs could see bigger paychecks this year.
It's already happening.
According to the Bureau of Labor Statistics December Non-farm Payrolls report, wages are up nearly three percent year-over-year, one of the biggest annual increases in seven years.
Demand for goods and services would rise, too. Workers would fill high-paying jobs related to infrastructure spending.
This would further push up demand for workers of every kind.
So, while Trump Administration policies could drive up rates, the average U.S. worker might be able to afford them just fine.
The economy could see relatively suppressed mortgage rates in tandem with high incomes and strong job prospects.Click to see today's rates (Jul 24th, 2017)
Fannie Mae and Freddie Mac are instrumental in keeping rates low.
These two organizations package and resell loans, freeing up cash so banks can keep lending. Efficiency lowers the cost of lending.
If the two agencies went away, mortgage rates would skyrocket.
Thankfully, no one expects the Trump administration to completely dissolve the companies. Rather, they could be moved out of government "conservatorship" as has been their status since the housing downturn in 2008.
It's unclear how that would affect mortgage rates.
In theory, rates could rise. The implied government backing the two agencies enjoy lowers risk for the investors who buy these mortgages.
Still, mortgage rate increases may be minimal or non-existent.
Investors may continue to assume the government will step in if the housing market goes south. In 2008, Fannie and Freddie were private organizations, yet the government still rescued them.
And it was because Fannie and Freddie were dipping into risky lending practices that they found themselves in trouble in the first place.
Lending standards are still conservative. Fannie/Freddie mortgages lately are relatively safe for investors, with or without government backing.
Trump could move Fannie Mae and Freddie Mac off the federal books, but huge mortgage rate changes aren't expected because of it.
Update: As of January 20, the Trump Administration has suspended the FHA fee cut indefinitely. Watch The Mortgage Reports for updates.
FHA reduced its annual mortgage insurance fee by 0.25%, but the action was repealed just hours after the Inauguration.
According to housing policy sources, the fee cut was one of the changes made by the previous administration to be put on the chopping block.
The change is an effective quarter-point hike on FHA loans, costing home buyers that use the program an average of $500 their first year of homeownership.
The question remains whether the cut is delayed or repealed completely. The HUD Secretary nominee, Ben Carson, is to review the fee reduction and its potential effect on FHA's balance sheet.
This situation is "wait and see" for now. After Inauguration Day, FHA policy could have a big impact on borrowers.Click to see today's rates (Jul 24th, 2017)
Mortgage interest rates will still be low after Inauguration Day 2017.
Markets are still uncertain about the economy's future. Growth is still subdued and the Fed is sticking with accomodative policy for now.
And rates could shoot lower in 2017.
Trump himself predicted European countries would follow Britain's lead in leaving the European Union. That move by Britain sent world markets reeling and led to U.S. mortgage rates near all-time lows last summer.
But even if mortgage rates stay elevated throughout the Trump presidency, home buyers could still get ultra low rates combined with healthy home appreciation.
Millions of refinancing homeowners are still "in the money" to refinance, thanks to rates in the low 4s.
And, values are set to skyrocket in 2017.
With programs like the cash-out mortgage, homeowners can take home equity out as cash for home improvements, debt consolidation, or almost any other purpose.
2017 will be a banner year for home buyers and homeowners alike.
The mortgage landscape is changing, and possibly for the better. Lenders are willing to approve more borrowers, and rates remain historically low.
Get a rate quote for your mortgage now. No social security number is required to start, and there's never obligation to continue if you're not satisfied with your rate.Click to see today's rates (Jul 24th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)