Fixed rate – Bobs Birdhouse http://bobsbirdhouse.com/ Tue, 21 Jun 2022 15:53:29 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://bobsbirdhouse.com/wp-content/uploads/2021/06/cropped-icon-32x32.png Fixed rate – Bobs Birdhouse http://bobsbirdhouse.com/ 32 32 Home sales fall for fourth consecutive month as interest rates rise https://bobsbirdhouse.com/home-sales-fall-for-fourth-consecutive-month-as-interest-rates-rise/ Tue, 21 Jun 2022 15:11:00 +0000 https://bobsbirdhouse.com/home-sales-fall-for-fourth-consecutive-month-as-interest-rates-rise/ SSales of existing homes fell last month for the fourth month in a row as homes became less affordable across the country. Sales of existing homes fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million, according to a National Association of Realtors report released Tuesday. Sales were down 8.6% from a […]]]>

SSales of existing homes fell last month for the fourth month in a row as homes became less affordable across the country.

Sales of existing homes fell 3.4% in May to a seasonally adjusted annual rate of 5.41 million, according to a National Association of Realtors report released Tuesday. Sales were down 8.6% from a year ago.

Additionally, the NAR said the median sale price for existing homes rose to $407,600, up 14.8% for the 12 months ending May. The rise marks 123 straight months of year-over-year price increases, the longest streak on record.

Mortgage rates have risen rapidly in recent months as the Federal Reserve made three interest rate hikes to rein in inflation.

On Tuesday, the average 30-year fixed-rate mortgage was 5.78%, up more than 2.8 percentage points from a year earlier. Last week, the Fed announced that it would increase its target interest rate (which is a different very short-term rate) by two-thirds of a percentage point, its most aggressive increase since 1994.

YELLEN AND THE FED RECOGNIZE THAT INFLATION GROWTH WILL LAST LONG BEYOND THE MID-TERM ELECTIONS

“Home sales have essentially returned to pre-pandemic 2019 levels after two years of stunning performance,” said NAR chief economist Lawrence Yun.

“Further declines in sales should be expected in the coming months given housing affordability issues related to the sharp rise in mortgage rates this year,” he added.

Homes for sale were also scarce. Total housing inventory at the end of May stood at 1,160,000 units, up 12.6% from April but down 4.1% from a year ago, according to the NARR.

The strongest year-over-year median price growth occurred in Miami, with prices rising 45.9%. Nashville, Tennessee saw 32.5% growth and Orlando, Florida saw a price increase of 32.4%, according to data from realtor.com.

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The housing market is expected to continue to cool as the Fed raises rates. Since the central bank typically raises rates by a quarter of a percentage point, it has essentially made six standard rate hikes since the start of the year, within a target range of 1.5% to 1.75 %.

The Fed has signaled it could make another historic 75 basis point hike after its next meeting in July, which some investors fear could tip the economy into a recession.

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Gulf sovereign wealth funds rethink fixed income as Fed hikes rates https://bobsbirdhouse.com/gulf-sovereign-wealth-funds-rethink-fixed-income-as-fed-hikes-rates/ Sun, 19 Jun 2022 23:30:44 +0000 https://bobsbirdhouse.com/gulf-sovereign-wealth-funds-rethink-fixed-income-as-fed-hikes-rates/ Published on 06/19/2022 As Gulf sovereign wealth funds fill their coffers with rising global oil prices, the influx of liquidity appears to be finding new homes in new debt issuances in a world of rising interest rates. Sovereign wealth funds like the Abu Dhabi Investment Authority (ADIA), the Qatar Investment Authority (QIA) and, to some […]]]>

Published on 06/19/2022


As Gulf sovereign wealth funds fill their coffers with rising global oil prices, the influx of liquidity appears to be finding new homes in new debt issuances in a world of rising interest rates. Sovereign wealth funds like the Abu Dhabi Investment Authority (ADIA), the Qatar Investment Authority (QIA) and, to some extent, on the central bank front, the Central Bank of Saudi Arabia have complained about the difficulties in finding returns in a world of low interest rates. SWFI estimates that ADIA has about US$100 billion allocated to sovereign debt, while the Norway Government Pension Fund Global has about US$250 billion and more in this tranche. These long-term institutional investors are active in the world of sovereign debt, eyeing the so-called bond issues of the century. The pendulum is now swinging the other way as Western governments have lost the ability to control inflation in part due to monetary policy inadequacies, fueling inflation to levels not seen in decades. US inflation accelerated to 8.6% in May 2022, a shocking 40-year high. The figure prompted the Federal Reserve to have its biggest interest rate hike since 1994.

US Treasury Secretary Janet Yellen said “unacceptably high” prices are likely to stay with consumers through 2022 on ABC’s This Week TV show on June 19, 2022. “We’ve had high inflation until present this year, and that’s inflation for the rest of the year,” she said on ABC’s “This Week” Sunday.

“I expect the economy to slow down,” she said, adding, “But I don’t think a recession is inevitable at all.”

Forcing Sovereign Wealth Funds to Adopt Higher Portfolio Risk and Century Bonds
Cash-rich sovereign wealth funds based in the Gulf achieved better performance results in the 2000s, 2010s and part of the 2020s by allocating capital to equity and illiquid markets such as private equity, private credit , infrastructure and, to some extent, real estate in some cases. Norway Government Pension Fund Global ended up having more than 70% of its massive portfolio in listed stocks, growing increasingly frustrated with finding suitable fixed income investments to generate a return. The accelerated quantitative easing policies of the Bank of Japan, the European Central Bank, the Federal Reserve and other European central banks have given these various governments the opportunity to essentially have “free money”. Sovereign debt at interest rates ranging from low to zero, sometimes at negative interest rates, at the time allowed these governments to spend and go into debt to try to catalyze their respective economies. Some sovereign wealth funds have adapted by allocating more to alternatives and listed equities, and entering riskier areas of the bond spectrum, such as emerging market debt and private credit. The decades-long maturities of some of these government bonds have made the price of the securities very sensitive to interest rates. This was clearly a lure for institutional fixed income buyers, as as interest rates fell, the gains were greater. It is now going in the opposite direction as holders of low interest rate securities are feeling the pain as new bonds are issued with higher interest rates.

Sovereign wealth funds that have over-allocated long-duration fixed-income securities are now seeing the value of their bonds decline, as higher-yielding government debt securities are issued. Do you remember the bonds of the century? Century bonds were heavily traded by Wall Street and other European banks. In March 2016, Ireland issued a century bond at a coupon of 2.35% via a private placement by Goldman Sachs and Nomura. In 2011, at a peak of the Eurozone debt crisis, Ireland’s 10-year bonds were at the 15% level. In 2017, JP Morgan helped Oxford University enter the capital markets for the first time in its 800-year history with the sale of a US$1 billion centenary bond. Companies such as The Walt Disney Company and Coca-Cola issued 100-year notes, and even defaulting sovereign governments like Argentina issued centennial bonds. JP Morgan led the sale of a 100-year bond for Austria in 2019 as yields across the world fell to record lows at the time. A good deal for Austria as it was able to tap into the very long-term debt market, seeking to take advantage of low interest rates. Austria first issued a 100-year bond in 2017, raising €3.5 billion and paying investors a 2.1% coupon. Pensions, sovereign wealth funds and insurance companies have been strongly touted during the low interest rate environment that long-term debt is attractive as it could be matched with long-term liabilities. Hedge funds and other riskier fixed income investors could also make gains through currency or interest rate swaps. The European Central Bank helped create an environment of negative interest rate bonds and century bonds on the continent, as the ECB accelerated the pace of its bond purchases over the decade.

Fast forward to 2022, as many bonds from well-rated long-term borrowers have fallen. The price of Oxford University’s debt due in 2117 – the bond of the century – has fallen 49% since the start of the year. Austria, which was highly rated by rating agencies, saw its 2120 bond price (bond of the century) drop to around 63%. Middle Eastern Sovereign Investors Rethink Bond Asset Allocation; should they wait? This is a plausible question for many investment committees.

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Stocks stem losses but still close worst week since March 2020 https://bobsbirdhouse.com/stocks-stem-losses-but-still-close-worst-week-since-march-2020/ Fri, 17 Jun 2022 22:59:20 +0000 https://bobsbirdhouse.com/stocks-stem-losses-but-still-close-worst-week-since-march-2020/ Placeholder while loading article actions Investors got some relief on Friday after a sharp turn in losses, but Wall Street still closed its worst week since the chaotic early days of the coronavirus pandemic, as the Federal Reserve’s aggressive push to tame inflation – and the danger of triggering a recession – has begun to […]]]>
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Investors got some relief on Friday after a sharp turn in losses, but Wall Street still closed its worst week since the chaotic early days of the coronavirus pandemic, as the Federal Reserve’s aggressive push to tame inflation – and the danger of triggering a recession – has begun to set in.

The Dow Jones Industrial fell 38 points, or 0.1%, a day after the blue chip index fell below 30,000 for the first time since January 2021. The S&P 500 rose 8 points or 0.2%, while the tech-heavy Nasdaq climbed 152 points. or 1.4 percent.

Investors are still grappling with the Fed’s momentous decision to raise interest rates by three-quarters of a percentage point. This decision has far-reaching consequences for consumers, as it makes borrowing money and credit card balances more expensive. New data released on Wednesday also pointed to a bumpier road, with higher unemployment, slower economic growth and record prices that will take longer to come back down.

Recession fears grow as Dow closes below 30,000 and mortgage rates soar

Mortgages, for example, have become much more expensive this week: a 30-year fixed-rate mortgage hit 5.78% this week, according to Freddie Mac. Just a week ago it was 5.23, marking the biggest one-week jump since 1987.

“The housing market is not crashing, but it is experiencing a hangover as it descends from an unsustainable high,” Redfin deputy chief economist Taylor Marr said in a blog post on Thursday. . “The demand for housing has already cooled considerably to the point that the industry has started to face layoffs. This week’s rate hikes will further stretch homebuyers’ budgets to the point that many more could be unaffordable,” he said.

Rates have almost doubled in recent months: a 30-year fixed rate loan, the most popular option, was close to 3% in November. The difference would add about $700 to the monthly mortgage on a $500,000 home, according to a Washington Post analysis. Over the life of the loan, the rate increase adds up to $256,000 in additional payments, more than half the price of the home.

The median home price in the United States was $391,200, according to the latest data from the National Association of Realtors, released last month.

“While many home sellers are already lowering prices, more homeowners are likely to decide to stay put now that the mortgage rate for a new home is significantly higher than what they are currently experiencing,” said Marr of Redfin. .

Americans brave enough to take a look at their 401(k) or other investment accounts have likely been faced with some ugly calculations. Portfolios spanning nearly every sector suffered declines, and color-coded grids showing stock gains and losses flashed a solid wall of red. The S&P 500, a key benchmark for measuring financial performance over time, has lost nearly a quarter of its value this year.

The broad index fell 5.8% for the week, its biggest loss since the public health crisis began in March 2020. The Nasdaq and Dow Jones both fell 5% for the week, highlighting the pessimism seeping into Wall Street.


The S&P 500 has the worst week

since March 2020

Monday kicked off a bear market

after higher than expected

inflation data

Stocks fall

following the Fed

rising interest rates

The S&P 500 has the worst week

since March 2020

Monday kicked off a bear market

after higher than expected

inflation data

Stocks fall after

Fed interest rate hike

and rising mortgage rates

But it’s not just investor sentiment that has deteriorated. Higher interest rates are designed to induce US consumers to spend less money, which dampens demand for products and services. While Fed Chairman Jerome H. Powell has defended the decision to aggressively raise interest rates to contain inflation, some experts worry the strategy could result in overreaction and plunge the economy into a recession later this year or in 2023. Further rate hikes are expected in the coming months, but they may come in smaller increments.

Investors will also look to corporate earnings for the next few quarters to gauge how executives are interpreting a potential economic downtown. Many U.S. management teams foresee hurdles ahead as rising costs and uncertainty around inflation slow demand for their products.

“These latest signals build on reduced projections from economists around the world as growth expectations have been tempered by a cocktail of persistent supply chain shortages, high inflation and heightened geopolitical uncertainty,” said Nicole Tanenbaum, Partner and Chief Investment Strategist. Financial management of ladies.

Richard Saperstein, chief investment officer of Treasury Partners, said the market was reacting to uncertainty surrounding the Fed’s efforts to control inflation. But he said an additional concern remains the unpredictable events related to the ongoing war in Ukraine that the market has not fully priced in.

As Wall Street goes wild, gasoline prices continue to climb as inflation has yet to peak, according to the latest data that may have surprised policymakers hoping for lower prices. But the economy has added several million jobs this year and consumer spending remains robust. The mixed signals present a conundrum to analysts and political leaders and highlight uncertainty about the future of the economy.

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Plagued by uncertainty, Spanish borrowers lock in mortgage rates https://bobsbirdhouse.com/plagued-by-uncertainty-spanish-borrowers-lock-in-mortgage-rates/ Thu, 16 Jun 2022 06:14:00 +0000 https://bobsbirdhouse.com/plagued-by-uncertainty-spanish-borrowers-lock-in-mortgage-rates/ In the midst of war, the ECB trembles, the Spaniards choose fixed rate offers Is a major change from variable rate mortgages Similar change in Italy and Germany MADRID, June 16 (Reuters) – Spanish homeowners, fearing a return to the turmoil that nearly bankrupted their country a decade ago, are rushing to protect themselves from […]]]>
  • In the midst of war, the ECB trembles, the Spaniards choose fixed rate offers
  • Is a major change from variable rate mortgages
  • Similar change in Italy and Germany

MADRID, June 16 (Reuters) – Spanish homeowners, fearing a return to the turmoil that nearly bankrupted their country a decade ago, are rushing to protect themselves from rising prices and runaway utility costs. borrowing by entering into new mortgage agreements that lock in repayment rates.

In a country where, according to Eurostat data, around three quarters of the population own their own homes, most used to choose variable rate mortgages and chose between competing offers from banks as the costs of Eurozone borrowing was bottoming out.

New demands rise as property prices soar, but three out of four are now fixed deals as war shakes confidence and the European Central Bank prepares to hike interest rates interest as markets crash.

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They seek financial security above all else, said Ignasi Viladesau, chief investment officer of Spanish neobank MyInvestor, and similar changes are underway in Italy and, to a lesser extent, Germany.

“You know how much you earn in your job and how much you will pay, so you can plan your budget much more easily,” Viladesau said.

In March, 73% – or about 4.6 billion euros – of new mortgages were at fixed rates, compared to 56% a year ago, according to the Spanish National Institute of Statistics – even if mortgages at fixed rates bore at the time an average interest of 2.68% against 2.15% for variable transactions.

Of Spain’s total mortgage debt of almost half a trillion euros, more than 120 billion is linked to fixed rates.

House prices which rose 8.5% in the first three months of 2022 – the strongest since the third quarter of 2007 – add to the uncertainty.

“Everything is driven by risk aversion,” said real estate agent Pablo Rodriguez.

A TWO-HALF GAME?

Eurozone interbank lending rate fixings jumped on Tuesday, reflecting a surge in bond yields and huge increases in market expectations for rates this week and illustrating why the shift in mortgage borrowing is not just a Spanish phenomenon. Read more

In Italy, fixed-rate mortgages account for 85% of new home loans, up from less than 30% a decade ago, according to the central bank.

In Germany, conservative borrowers have long favored fixed repayments but are now locking them in longer – 14 years on average compared to 13.3 in 2021, according to German mortgage broker Interhyp.

“People increasingly want to get favorable interest rates for longer,” said Mirjam Mohr, Interhyp’s board member overseeing retail.

“Many of our customers are worried. They see the level of interest rates rising and feel some pressure to get favorable interest rates quickly.”

Interest in fixed rate deals has also increased in Portugal, although many are opting to stick with cheaper variable rates, a banking source said.

For Rafael Miralles Ponce, a partner at Spanish consumer group Adicae, now is not the time for borrowers to put their future “in the hands of a bank”.

“It’s like a football match,” he said. “The bank can score the first goal, but then there’s the whole game, and I win with a landslide victory.”

($1 = 0.9564 euros)

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Reporting by Jesús Aguado; additional reporting by Tom Sims and Francesco Canepa in Frankfurt, Valentina Za in Milan, Sergio Gonçalves in Lisbon and Lawerence White in London; edited by John O’Donnell and John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

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How mortgage rates have changed since 1972 | Personal finance https://bobsbirdhouse.com/how-mortgage-rates-have-changed-since-1972-personal-finance/ Tue, 14 Jun 2022 15:30:00 +0000 https://bobsbirdhouse.com/how-mortgage-rates-have-changed-since-1972-personal-finance/ Unless you plan to buy real estate with an all-cash offer, you’ll likely take out a mortgage. It’s never a bad idea to be aware of mortgage rates, which can be constantly changing due to a variety of factors, including inflation, economic growth, Federal Reserve policies, the bond market, and real estate market conditions. Extra […]]]>

Unless you plan to buy real estate with an all-cash offer, you’ll likely take out a mortgage. It’s never a bad idea to be aware of mortgage rates, which can be constantly changing due to a variety of factors, including inflation, economic growth, Federal Reserve policies, the bond market, and real estate market conditions.

Extra Space Storage, a real estate storage owner and operator in the United States, looked at historical mortgage data from federal loan buyer Freddie Mac to find the average annual rate for a 30-year fixed-rate home loan, with data dating back to 1972.

A fixed rate mortgage is a home loan with a fixed interest rate for the life of the loan. Typically, you’ll see 30- or 15-year fixed mortgages; legacy mortgages are the most common type, with around 90% of home buyers using one in their home purchase.

Mortgage rates were highest in the 1980s when the Fed raised interest rates to fight inflation. Today, economic uncertainty and inflation are driving up mortgage rates. In May 2022, the 30-year fixed mortgage rate was 5.25%, while the average 15-year fixed mortgage rate was 4.43%. So what did they look like 5-10 years ago? Keep reading to see how mortgage rates have changed since the early 1970s.

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Fixed Income: Adjust Your Debt Fund Strategy Now https://bobsbirdhouse.com/fixed-income-adjust-your-debt-fund-strategy-now/ Sun, 12 Jun 2022 19:15:00 +0000 https://bobsbirdhouse.com/fixed-income-adjust-your-debt-fund-strategy-now/ With rising interest rates, mutual fund investors are redeeming their money market investments and low to short duration funds. In May, mutual funds reported a net outflow of Rs 32,722 crore after reporting a net inflow of Rs 54,756 crore in April. Higher yields and a preference for equities also affected flows to debt funds. […]]]>

With rising interest rates, mutual fund investors are redeeming their money market investments and low to short duration funds. In May, mutual funds reported a net outflow of Rs 32,722 crore after reporting a net inflow of Rs 54,756 crore in April. Higher yields and a preference for equities also affected flows to debt funds.

Data from the Association of Mutual Funds in India shows that money market funds recorded the highest outflows of nearly Rs 14,600 crore, followed by Rs 8,600 crore from short term funds and Rs 7 105 crore very short term funds. Only overnight, liquid and gold funds recorded inflows. There was also a reduction in the number of folios from 73.43 lakh to 72.87 lakh between April and May 2022.

Yields up

Since the start of 2022, long-term yields have increased by more than 100 basis points and short-term yields have increased by more than 150 basis points. Analysts say much of the potential rate hikes are already factored into current bond valuations and the yield spread between the three one-year bonds (6.94%) versus the three months (4.98%) is around 196 basis points compared to its 20-year long-term average of around 70 basis points. Soaring yields have caused difficulties for investors entering the debt market over the past year.

Short term strategy

Experts say as interest rates firm, investors should occasionally turn to short-term debt mutual funds and switch to long-term funds early next year. , as the Reserve Bank of India is expected to raise the repo rate by an additional 50 to 75 basis points (bps) by the end of this year, after raising the repo rate by a cumulative 90 bps to 4.9% in one little over a month.

For those with a short-term investment horizon, floating rate funds would be ideal. Puneet Pal, Head of Fixed Income, PGIM India MF, recommends investors increase their investments in actively managed short duration products while selectively reviewing dynamic bond funds based on their risk appetite.

Nitin Shanbhag, Head of Investment Products, Motilal Oswal Private Wealth, suggests that for fixed income portfolios, the core allocation should be in high credit quality target maturity debt funds that invest in a combination of instruments rated G-Secs, SDL and AAA. .

Akhil Mittal, Principal Fund Manager, Tata Mutual Fund, says it would be prudent to invest in debt funds with shorter durations as accruals are decent and duration risk is contained. “Rising overnight rates bode well for floating rate funds. Floating rate bonds can benefit from rate increases as accrued liabilities increase while the effective duration remains very low. So high predictability and lower volatility could make floating rate funds a well-suited choice at the current time,” he says.

Investors with a holding period of more than two to three years should look to aggressive bond funds that have the flexibility to change portfolio positioning as market conditions change. However, they may experience some intermittent volatility in portfolio value. In fact, medium and long-term interest rates in the bond markets are already at long-term averages relative to fixed deposits, which remain low.

Liquidity potential

After the sharp rise in bond yields since January, the return potential of liquid debt funds has improved significantly. Pankaj Pathak, Fund Manager, Fixed Income, Quantum Mutual Fund, says the spread between bank savings rates and liquid fund returns will widen and remain attractive. “Investors with a short holding period and a low appetite for risk should stick to liquid funds or good credit quality portfolios,” he says.

Track rate hikes

*Base allocation must be high credit quality target maturity debt funds

*For those with a short-term investment horizon, floating rate funds would be ideal

*Look at dynamic bond funds if you plan to hold more than two to three years

* The return potential of liquid debt funds has also improved significantly

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I once refinanced my mortgage at a higher rate. here’s why https://bobsbirdhouse.com/i-once-refinanced-my-mortgage-at-a-higher-rate-heres-why/ Fri, 10 Jun 2022 20:52:44 +0000 https://bobsbirdhouse.com/i-once-refinanced-my-mortgage-at-a-higher-rate-heres-why/ Image source: Getty Images A higher interest rate is usually bad news, but not in this case. Key points Refinancing involves obtaining a new mortgage to replace the old one. Usually people refinance to lower the interest rate they pay on their debt. There are other reasons to refinance, which could sometimes justify refinancing into […]]]>

Image source: Getty Images

A higher interest rate is usually bad news, but not in this case.


Key points

  • Refinancing involves obtaining a new mortgage to replace the old one.
  • Usually people refinance to lower the interest rate they pay on their debt.
  • There are other reasons to refinance, which could sometimes justify refinancing into a higher rate loan.

Many people refinance a mortgage hoping to save money. Refinancing involves replacing one mortgage with another by applying for new financing and using the loan proceeds to pay off your current lender. Usually, it only makes sense to get a new mortgage if your interest rate on the new loan will be lower than what you are currently paying.

In the past, however, I’ve actually refinanced a new loan despite the rate being a bit higher than what I was currently paying. Although it may seem like that at first glance, it was not a bad financial choice. In fact, it was a smart move that ended up saving me money in the long run.

Here’s why making the decision to refinance a mortgage with a higher interest rate made sense for me — and might for you, too.

In this situation, refinancing makes sense even if the rate of the new loan is higher

There was a simple reason why I chose to refinance into a new, larger loan despite the fact that my financing costs would initially increase. I made this decision because the mortgage I had was an adjustable rate mortgage, so my current low rate was not likely to stay low for much longer.

You see, at the time I got my initial loan, I didn’t have that much financial experience and didn’t really think about the downsides of adjustable rate mortgages or ARMs. The starting rate I was offered on the ARM was lower than the 30-year fixed rate loan, so it seemed like a good deal.

However, I was only guaranteed to maintain this starting rate for a limited number of years. And I was nearing the end of that period and expecting rates to continue to rise. I didn’t want to risk my ARM financing costs exploding, so I decided it would be a better choice to refinance to a 30-year fixed rate loan, which would guarantee me the same rate for the entire term. life of a loan. This change made sense even if it meant accepting that my new loan had a higher rate than the one I was paying at the time.

The trade-off made a lot of sense: foregoing the lowest rate immediately, rather than waiting for it to start rising on its own within a short period of time, in order to achieve the guaranteed consistency of a mortgage at fixed rate.

My experience shows the disadvantages of ARMs and why accepting a higher rate may make sense

In my case, I was lucky enough to be able to refinance my home loan before my rate started to adjust. And I was lucky that even though the loan I refinanced had higher interest charges than my current mortgage, those rates were still quite reasonable and my payments were still affordable.

But, the reality is that I was still dealing with my rate going up and still had to accept refinancing into a more expensive loan. And that’s the big reason why it often makes sense to avoid ARMs. The upfront benefits they offer come with a lot of risk, and it may be best to get started right away with a 30-year fixed rate loan so you can be sure your payment won’t change for the life of your loan. .

The Best Mortgage Lender in Ascent in 2022

Mortgage rates are rising – and fast. But they are still relatively low by historical standards. So if you want to take advantage of rates before they get too high, you’ll want to find a lender who can help you get the best rate possible.

This is where Better Mortgage comes in.

You can get pre-approved in as little as 3 minutes, without a credit check, and lock in your rate at any time. Another plus? They do not charge origination or lender fees (which can reach 2% of the loan amount for some lenders).

Read our free review

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ECB confirms rate hikes from July https://bobsbirdhouse.com/ecb-confirms-rate-hikes-from-july/ Thu, 09 Jun 2022 14:58:29 +0000 https://bobsbirdhouse.com/ecb-confirms-rate-hikes-from-july/ The European Central Bank confirmed what it had been strongly implying for quite some time. The bank will start raising interest rates for the first time in more than a decade next month. So what does all of this mean for consumers and mortgage holders across the bloc? First steps The ECB has been criticized […]]]>

The European Central Bank confirmed what it had been strongly implying for quite some time.

The bank will start raising interest rates for the first time in more than a decade next month.

So what does all of this mean for consumers and mortgage holders across the bloc?

First steps

The ECB has been criticized for what many believe has been its slowness to react to the inflationary environment.

Prices in the Eurozone have risen at an annual rate of more than 8% according to the latest figures.

That’s more than four times the 2% target rate at which central banks like to keep inflation going.

The bank had stuck to the argument that inflation was transitory and had more to do with supply chain issues resulting from the pandemic and the reopening of economies.

This argument was more or less abandoned after the Russian invasion of Ukraine.

But the debate then shifted to what level of interest rate hike would be appropriate in the context of an economy that could risk contracting with a war raging on its doorstep.

He is given some indications on how he intends to proceed now.

The bank will get off to a smooth start by raising its rates by 0.25% at its meeting in mid-July.

We more or less knew this was coming and a further rate hike in September was expected.

However, this has changed the settings somewhat for what’s to come in September.

He said if the inflation outlook persists or deteriorates, “a bigger increase will be appropriate at the September meeting.”

It was a bit of a surprise.

Moreover, he anticipates that a “gradual but sustained path of further interest rate increases will be appropriate” beyond that.

Will my mortgage interest rate go up in July?

The bank is likely to focus on the deposit rate first, which is at -0.5%.

This will almost certainly be down to zero by September.

This is the rate financial institutions get for depositing excess money with the ECB (despite being charged for it in the era of negative rates).

The rate that affects our borrowings is currently zero.

Now it comes down to when they choose to start increasing that rate.

In light of further guidance from the bank at the September meeting, it could start pushing that rate higher from there, or it could even raise it in July along with the deposit rate.

As soon as this rate increases, the cost of variable and tracker mortgages will increase.

President of the ECB, Christine Lagarde

What difference would it make to my tracker?

Joey Sheahan, Credit Manager at MyMortgages.ie and author of the Mortgage Coach, crunched some numbers on this.

A borrower who has €300,000 outstanding on a 1% tracker rate, with 20 years remaining, would currently have a monthly repayment of €1,379.

“A 0.5% rise in interest rates would bring that to €1,447 – an annual increase of €816, or €16,320 over 20 years,” he explained.

“A 1% rise in the ECB benchmark rate would bring monthly repayments to €1,517, an annual increase of €1,656 or €33,120 over 20 years,” he added.

Trackers are no longer issued, so someone who took out a floating rate mortgage more recently would be variable rate.

Mr. Sheahan used the example of a similarly sized mortgage at a variable rate of 4.25% with 30 years left to term.

Such a mortgagee would have monthly repayments of €1,475.

“A 0.5% increase in interest rates would bring that to €1,564, an annual increase of €1,068 or €32,040 over 30 years,” he said.

“A 1% rise in the ECB benchmark rate would bring monthly repayments to €1,656, an annual increase of €2,172 or €65,160 over 30 years.”

What about fixed rates?

Some fixed rates have started to rise in recent months as the cost of ‘longer term’ money has started to rise.

This process is likely to accelerate now, with the ECB confirming the end of its bond buying programs and signaling higher interest rates.

But there is still very good value to be found in fixed rate mortgages and there has been an increase in switching activity of late.

“We are seeing a steady increase in the number of movers/second home buyers seeking mortgage approvals with flexible long-term fixed rate options. This follows the trend set by existing mortgage holders looking to protect themselves against impending future increases. interest rates,” said Trevor Grant, president of the Association of Irish Mortgage Advisors (AIMA).

Rachel McGovern, director of financial services at Brokers Ireland, said substantial savings were to be made by switching providers and fixing prices.

“Over the past 10 years, we have gone from an average fixed rate of 4.85% to today where the average fixed rate is 2.59% on new fixed rate agreements,” he said. she pointed out.

She also suggested looking at the option of fixing for longer periods with fixed rates up to 30 years now available.

“Long-term fixed interest rates, which are relatively new in Ireland, have brought the best value to the Irish market in recent years,” she said.

How high are rates likely to go?

Central Bank statements still contain a lot of wiggle room.

And they should because the situation can change very quickly and they need to be able to change course to deal with new scenarios.

But now it looks like we’re well on our way to an era of more expensive silver.

The main borrowing rate in the UK has already been raised to 1% by the Bank of England and the US Federal Reserve has moved rates to a similar stage.

And they probably haven’t finished yet.

It would not be unreasonable to suggest that we are on a similar path here.

Austin Hughes, chief economist at KBC Bank Ireland, referring to today’s inflation figures from the CSO, said the pace of price increases showed no signs of slowing.

“With fuel prices rising further in early June and the impact of rising transport costs and global supply issues not yet fully visible, it is likely that Irish inflation will not yet have peaked,” he explained.

“It seems likely that headline inflation could push to near 9% and could even threaten 10% depending on the vagaries of global energy markets,” he added.

He added that any pullback would likely be modest and could be slow to materialize, especially in light of contagion effects in areas such as increases in mortgage rates.

On the other hand, some point out that the bank may be too hasty in signaling rate hikes at a time of such uncertainty in the overall economic outlook.

“The possibility of a bigger increase from September increases the risk of an ECB policy error,” said Bill Papadakis, macro strategist at Swiss bank Lombard Odier.

“Conditions in the Eurozone are different. GDP is still below pre-pandemic levels, wage growth is much more subdued, and growth is threatened by the war in Ukraine. Basically, the war is fueling the upside energy prices, which in turn are causing high inflation in Europe More expensive energy is eating away at consumers’ real incomes, undermining growth, which is likely to suffer if the ECB goes further ahead with an aggressively tighter monetary policy.

If that were to happen, the ECB might be forced to reassess how aggressively it is raising medium-term interest rates.

In the short term, the rates only go in one direction, that is to say upwards.

Until what point? Nobody really knows.

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New home buying apps drop nearly 11% in April https://bobsbirdhouse.com/new-home-buying-apps-drop-nearly-11-in-april/ Tue, 07 Jun 2022 21:57:32 +0000 https://bobsbirdhouse.com/new-home-buying-apps-drop-nearly-11-in-april/ Mortgage Bankers Association (MBA) Building Applications Survey (BAS) data for April 2022 shows that mortgage applications for the purchase of new homes are down 10.6% from last year. a year ago. Month over month, mortgage applications were down 14% (this change does not include any adjustment for typical seasonal trends). MBA estimates that sales of […]]]>

Mortgage Bankers Association (MBA) Building Applications Survey (BAS) data for April 2022 shows that mortgage applications for the purchase of new homes are down 10.6% from last year. a year ago. Month over month, mortgage applications were down 14% (this change does not include any adjustment for typical seasonal trends).

MBA estimates that sales of new single-family homes occurred at a seasonally adjusted annual rate of 701,000 units in April 2022.

The MBA’s new home sales estimate is derived from BAS mortgage application information, as well as assumptions about market coverage and other factors.

“New home buying activity declined on a monthly and annual basis in April as soaring mortgage rates cooled demand, and homebuilders continued to grapple with rising costs, supply chain issues and extended completion times,” said MBA Partner Joel Kan. Vice President of Economic and Industrial Forecasting. “With the supply of existing homes on the market still at extremely low levels, the new home market is an important source of housing supply. However, the pace of construction has slowed in recent months. MBA’s estimate of new home sales fell for the fifth straight month to 701,000 units, the slowest pace of sales since May 2020.”

The National Association of Home Builders (NAHB) recently reported in its Home Building Geography Index (HBGI) that the year-over-year growth rate of single-family construction in the regional urban, suburban and rural submarkets of small and large metropolises slowed in the first quarter. -over one year, with a notable deceleration in the major suburban markets.

Additionally, the NAHB also reported a significant decline in builder confidence in the market for newly built single-family homes, which fell eight points to 69 in May, marking the fifth consecutive month that builder sentiment declined to its lowest level since June. 2020.

The MBA’s BAS said the seasonally adjusted estimate for April is a decrease of 6.8% from March’s pace of 752,000 units. On an unadjusted basis, the MBA estimates that there were 65,000 new home sales in April 2022, down 12.2% from 74,000 new home sales in March.

“The average loan size increased to a new high of $436,576, and more than half of the applications were for loan amounts over $400,000,” Kan said. of the market. »

Freddie Mac said the 30-year fixed rate mortgage (FRM), while sliding over the past few weeks, still remains above the 5% mark, causing even more affordability issues for many potential buyers.

By product type, conventional loans accounted for 76.7% of loan applications, while FHA loans accounted for 13.1%, RHS/USDA loans 0.2%, and VA loans 10.1%.

In terms of average loan size, new homes increased by more than $400 month-over-month, from $436,151 in March to $436,576 in April 2022.

However, Redfin reports that more sellers are feeling the pressure to sell and have resorted to lowering the price of their homes amid rising interest rates and mounting affordability concerns. More than one in five sellers surveyed by Redfin have lowered their price, the highest rate since October 2019.

“The surge in mortgage rates led to a sudden and significant slowdown in the housing market in May,” said Chen Zhao, head of economic research at Redfin. “However, mortgage rates are now stabilizing and housing supply remains tight, so while we expect house price growth rates to decline, we don’t expect prices to fall much in the future. National level. For homebuyers trying to figure out the best time this year, the main benefit of waiting is that there may be less competition as supply begins to pile up.

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RBA to rise 25 basis points tomorrow, says AFR Economics Editor – Christopher Joye https://bobsbirdhouse.com/rba-to-rise-25-basis-points-tomorrow-says-afr-economics-editor-christopher-joye/ Sun, 05 Jun 2022 23:04:59 +0000 https://bobsbirdhouse.com/rba-to-rise-25-basis-points-tomorrow-says-afr-economics-editor-christopher-joye/ The RBA will rise by 25 basis points tomorrow, according to the Australian Financial Revieweconomics editor John Kehoe, raising the target overnight rate to 60 basis points. Kehoe further asserts that the RBA will continue in 25 basis point increments until it reaches 110 basis points in August, after which it will be revalued. It […]]]>

The RBA will rise by 25 basis points tomorrow, according to the Australian Financial Revieweconomics editor John Kehoe, raising the target overnight rate to 60 basis points. Kehoe further asserts that the RBA will continue in 25 basis point increments until it reaches 110 basis points in August, after which it will be revalued. It all seems like very sensible stuff. This is also the second time in the past few days that Kehoe has delivered what appears to be a message on behalf of Martin Place to actively recalibrate expectations (see the first post here).

Kehoe’s 25bps call stands in stark contrast to other hawks in the media. Legendary Australian columnist Terry McCrann is pushing for a 40bp to 65bp hike and has been incredibly critical of the central bank – marking a notable shift from his historic support for the RBA. And then we have Centralbankintel founder Sophia Rodrigues, who was equally hawkish and argued for a 40 basis point hike in June. It should be noted that McCrann wanted a bigger upside in May (although it was early to call May) and Rodrigues didn’t expect a upside in May, pushing for June instead.

Kehoe’s key argument, which I support, is that the RBA wants to send a “business as usual” signal. To quote AFR directly:

The Reserve Bank of Australia will likely raise the cash rate by 0.25 percentage points on Tuesday, even though money markets are betting on a bigger hike. RBA Governor Philip Lowe said last month that a 25 basis point increase was a “signal that we are back to business as usual”…
Lowe’s stated preference just five weeks ago was for conventional changes of 0.25 percentage points. Since then, the March quarter GDP result has been strong. Wage and earnings data was mixed. Three or four rate hikes in successive months would bring the cash rate to just over 1% by August and allow the RBA to reassess the monetary policy outlook in the second half of the year. .

The RBA’s monetary policy mechanism is exceptionally powerful in Australia, with most borrowers having floating rate loans or short-term fixed rate products that convert to floating rates within two to three years.

We have highlighted that house prices are already falling quite rapidly in the two largest cities, Sydney and Melbourne, with auction resolution rates over the weekend continuing to deteriorate. CoreLogic reports that the national clearance rate is expected to fall below 60% for the second week in a row after the preliminary printed estimate of 62% (from 71% a year ago).

In Sydney, conditions appear to be in free fall with a preliminary clearance rate of 59% (down from 76% a year ago), which will almost certainly be revised downwards once final figures are known. We have repeatedly argued that after the first 100 basis points of RBA hikes, national home values ​​would fall by a record 15-25%, albeit in an orderly fashion. And we remain optimistic about the resilience of the Australian economy.

Auction clearance rates are plummeting

Kehoe noted that while GDP was strong, data on wage growth was mixed. It is also clear that Australia’s high inflation rates are currently driven by supply-side influences. With a sharply turning housing market and no current evidence of a price-wage spiral, the RBA has plenty of time on its side, even if it wants to take the cash rate to 150-175 basis points by the end of the day. end of the year.

Another interesting facet of current interest rate market pricing is the huge disconnect between variable rate (or floating rate) and fixed rate pricing. Last week we saw Victoria borrow $4.4 billion at 1.3% for 8-year variable rate money, compared to the 4% and more they would have to pay if they borrowed through fixed-rate products. fixed rate. Queensland borrowed a further $500 million through floating rate products on Friday. Almost all of these bonds were sold to banks seeking to build up their high-quality liquid assets.

Households are in the same situation: discounted variable-rate mortgages cost around 2.25% compared to 4.5% for fixed-rate loans over 3 years. So there is potential arbitrage for borrowers if interest rate markets, which boldly assume the RBA will raise its cash rate north of 3.5%, get it wrong. There is a case where a lack of liquidity in the interest rate markets since the RBA blew up the interest rate doves in November last year has exacerbated current misconceptions about the trajectory cash rate future…

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