Now that the events of early November are starting to settle, it looks increasingly president-elect Joe Biden will become the 46th president of the United States. Many people are wondering what effect this change might have on interest rates. After all, we have seen a long stretch of record low rates. Homebuyers in the market to get a mortgage loan in the coming months want to know if it seems likely that rates will remain low, or if an increase is coming.
First, it’s important to mention that nobody can predict exactly what the interest rate will do even a week from now. There are many factors that go into setting interest rates, and how lenders assess the overall risk to determine what rates they will offer. However, we can look at some broad trends to give you an idea of what might be coming for interest rates. That helps determine whether now is a good time to act to get your mortgage loan or refinance loan secured.
Investors’ initial reaction
The initial reaction by investors seems to be one of optimism. The stock market rallied in the wake of the election in early November after Biden was declared president-elect. Positive vaccine trial results from two leading manufacturers also sent stocks soaring, resulting in the highest month of stock market gains since 1987. Wall Street appears to be feeling positive about the people Biden plans to appoint in his Cabinet. Many believe he will bring a moderate approach to business and regulation, which is good for markets.
Even as the market is generally looking up right now, though, interest rates have remained low. Since rates are not tied directly to stock market performance, this is likely the result of other economic indicators.
COVID-19 uncertainty still remains
Another factor in the future of rates is what happens with COVID-19. Despite the stock market gains, a significant portion of the U.S. population is still unemployed or underemployed as a result of COVID-19. That means the economy may continue to sputter and struggle for several months. A new Congress may provide some stimulus, but most economists agree that it will take several months (or even years) for the economy to fully recover.
However, if the vaccines provide the boost that they promise right now, there is a good chance that interest rates will rise as investors look for bigger returns and things return mostly to normal.
What it means for a borrower
If you watched interest rates in 2020, heard discussions of “record lows” or “historic lows,” and thought it couldn’t get any lower, you were probably surprised to see that rates kept falling. But even historically low runs have to come to an end at some point, so the current low rates will not last forever. If you’re thinking about buying a home, right now is the perfect time to do it.
Contact Integrity First Lending to learn more about our mortgage loan options. We’ll help you lock in the current low rates.