The 30-year fixed-rate mortgage fell one basis point, the 15-year rose one basis point and the 5/1 ARM fell one basis point, according to a NerdWallet survey of daily mortgage rates published by national lenders Wednesday. The 30-year fixed is five basis points lower than a week ago and is 33 basis points higher than a year ago.
Mortgages are an important part of the tax reform plan that House Republican leaders introduced Thursday. The proposal would limit the mortgage interest tax deduction in two ways:
- By raising the standard deduction
- By cutting the amount of debt that could be deducted
Standard deduction increases
The standard deduction for a family would increase to $24,000 from $12,700. That means fewer people would itemize tax deductions. For this tax year, families have an incentive to itemize deductions if they pay more than $12,700 in mortgage interest, charitable contributions, state and local taxes and other deductible expenses. Under the proposed tax reform plan, families wouldn’t itemize unless they had more than $24,000 in deductible expenses.
Mortgage interest deduction gets cut in half
The tax reform plan would cap deductions on interest payments for new mortgages. Right now, homeowners can deduct interest on their first $1 million of mortgage debt. The tax reform plan would limit deductibility to interest on the first $500,000 of mortgage debt — but only for new home loans. Existing mortgages would get to keep the higher limit.
According to the nonpartisan Tax Policy Center, about 4% of filers would take the mortgage interest tax deduction under the proposal, compared to 21.3% of households under current tax law.
Realtors: Home values could be at risk
The National Association of Realtors said in a news release that it is “currently reviewing the details of the tax proposal,” but that it seems to put “home values and middle-class homeowners at risk.” It created a YouTube video encouraging homeowners to tell Congress, “Don’t let tax reform become a tax increase.”
In a statement, the National Association of Home Builders said the plan was “particularly disappointing, given that the nation’s home builders warned that the proposal would severely diminish the effectiveness of the mortgage interest deduction and presented alternative policies that would retain an effective housing tax incentive in the tax code.” The association said it had lobbied unsuccessfully for a homeownership tax credit.
The plan has some support in the housing industry. The Mortgage Bankers Association has said it “supports the intent to preserve the mortgage interest deduction, though in combination with the near doubling of the standard deduction for individuals and households.”
MORTGAGE RATES TODAY, THURSDAY, NOV. 2:
NerdWallet daily mortgage rates are an average of the published annual percentage rate with the lowest points for each loan term offered by a sampling of major national lenders. APR quotes reflect an interest rate plus points, fees and other expenses, providing the most accurate view of the costs a borrower might pay.