Nov. 15, 2016
Now that things have settled a little bit since the election, we have an idea about how Trump’s victory will have an impact economically.
The estimates below are based on someone with a credit score of 740.
FHA 30 year fixed: 3.75% - 3.875%
Conventional Financing: 4.125% - 4.25%
Down payment assistance rates (as of 11/14/16) - plan on these to go higher:
Home In 5 FHA: 4.375%
Home Plus Conventional: 5.0%
Pathway to Purchase Conventional: 4.5%
We will eventually see these rates plateau, but most likely things will get worse before they get better. In the past three days we have seen rates increase significantly by 0.5 - 0.625%. This definitely affects buyers currently looking for homes at the top of their price point. Between last Wednesday and yesterday, we have lost a total of 280 basis points. What that means is that in order to get the same rate on a $100,000 loan a buyer would have to pay $2,800 or 2.8 origination points.
Below the graph shows us the trend of mortgage interest rates, the green indicates that rates are improving while the red tells us that rates are going up. As you can tell, this graph shows us visually what we have been seeing with mortgage interest rates since the election.
Inflation and Interest Rates
Investors and economists alike believe that the election of Trump and a Republican congress, a new era of spending on infrastructure, tax cuts, and new trade policies. All of this together will lead to a rise in inflation.
The increase in money floating around in the economy - from spending and tax cuts – will push the Federal Reserve to raise the interest rates.
According to Joe Hanson at VIP Mortgage, we have already seen this rise in interest rates taking place. It is also more likely than not that we will see continued increase unless there is some stumble in the economy.
There is no true and confident prediction in how the economy will behave under President-elect Trump, however, economists do believe that there is a 75% chance that the Fed will raise interest rates when they meet in mid-December.
None of this should scare you. Currently, interest rates are still low and it is a great time to buy.
If you want to catch the market before interest rates rise, start your home search here.