Biden's Impact on High Inflation

This was a short clip from a conversation I had on a podcast in November 2024, and the question was where interest rates will land over the next four years. Will they go back to where they were a few years ago, or not? I gave my honest answer, and I want to share the reasoning, because it helps explain why borrowing costs feel the way they do.

The first thing I said is to look at why rates got so low in the first place. When Trump was in office the first time, Freddie Mac's 30-year average mostly ran around 4% to 4.5%, peaking just under 5% in late 2018. Then we went into the pandemic right at the end of his term, and the financial markets went into complete chaos because people were worried about losing jobs. Rates moved fast. Right as he was leaving and Biden was entering, the Federal Reserve stimulated the economy in a way that had never been done before. It lowered interest rates to all-time lows and pumped a ton of stimulus into the market.

At the time, that made a lot of people a lot of money, including me. People with assets did really well. And lower to moderate income households got a lot of free money and benefits. They got stimulus checks, moratoriums on mortgages and rent, and a pause on student loans. But I believe that caused the greatest inflation we have had in 40 years. Now many of the same people would trade those days back to be able to afford groceries.

What I take from that is that there is no free lunch. Everything comes back to bite us in some way. The pandemic put us in a position where we are today, with inflation and expensive housing, and I said Trump did some good things, too. In my view, all that stimulus flowed back into assets and out of the hands of the people who needed it most. That is unfortunate, but it is what I believe happened.

I am not telling you who to vote for, and these are my views as a lender who watched it happen. The practical reason I bring it up is that inflation is the thing that drives borrowing costs. Mortgage rates will not go back to the lows just because we want them to. The sub-3% rates were an unusual moment, and many people who bought or refinanced then locked in something that may not come again.

If you are a homeowner, the question is what makes sense at today's numbers, not whether we will get back to the pandemic lows. A refinance only makes sense if the break-even works. If you are a buyer, plan around the rate that is available now and revisit it if rates improve.

To see where you would land today, look at refinance options, or get your rate. MortgageOne is now licensed in 49 states.