Fixed rate – Bobs Birdhouse http://bobsbirdhouse.com/ Fri, 18 Nov 2022 08:36:24 +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 Is the mortgage rate or the purchase price more important? | Company https://bobsbirdhouse.com/is-the-mortgage-rate-or-the-purchase-price-more-important-company/ Fri, 18 Nov 2022 08:00:00 +0000 https://bobsbirdhouse.com/is-the-mortgage-rate-or-the-purchase-price-more-important-company/ If you’ve been thinking about buying a home and have been hesitating because you’re just not sure of the right time, the following information is for you… Trying to time the market to identify a moment in time to identify the right time to buy a home is an incredibly difficult business indeed. It’s like […]]]>

If you’ve been thinking about buying a home and have been hesitating because you’re just not sure of the right time, the following information is for you…

Trying to time the market to identify a moment in time to identify the right time to buy a home is an incredibly difficult business indeed. It’s like trying to locate a needle in a haystack. A better, more pragmatic scenario would be to look at your money, credit, and income and decide to buy a home based on your household budget.

It comes down to your income, your monthly expenses, and a good basic financial framework so you can make an informed decision. If all of that is in place, how do you determine what is the most important purchase price or interest rate? As interest rates continue to rise, your competition disappears. Rising interest rates eliminate your competitors. If you want to make an offer to buy a house and your competition is weak or non-existent, you hold all the cards and you hold all the power to negotiate a fair price for the house. After all, who wants to pay too much for a house?

How do we know you won’t pay too much for the house? It’s surprisingly simple: interest rates stimulate competition. In other words, because interest rates are so high, many are sitting on the sidelines waiting to see what the market does. This is good news for you as a smart and savvy buyer, as it allows you to negotiate the purchase price of the home. Negotiating a purchase price reduction from $50,000 to $100,000 in this environment is not out of the question.

Suppose, for whatever reason, you are worried about the falling market and housing prices, well, in most markets, rents are still in high demand. On the other hand, we all know that this interest rate environment is not sustainable and that long term mortgage rates will come down. When interest rates go down, borrowing power goes up, when borrowing power goes up, your competition goes up. More people will be after that same house at a 6 or a 5 percent mortgage rate than they will at a 7 percent mortgage rate. It’s just a hard fact. So, in other words, your $600,000 home today with a 30-year 7% fixed rate mortgage could very easily be a $650,000 or $675,000 or more home at a rate 6% mortgage assuming interest rates fall. The idea that housing prices will fall due to high interest rates is very unlikely, as rents continue to soar, long-term fixed rates are about to fall and the supply of housing remains weak.

Think of it like this: if you buy a house today, you can always swap the mortgage rate for something better when rates drop in the future. The way you should see it as an informed homebuyer should be something like this: a mortgage rate of 6.75% today, for example, could very easily be a mortgage of 5.75% in 12 months and a 4.75% mortgage in 24 months. Using a purchase price of $600,000 for the example above, this will result in lower mortgage payments of approximately $800 when interest rates drop through subsequent refinancing opportunities. Waiting to see what happens in the future can make sense if there are concerns about your credit, down payment, or money. If these elements are in place and your goal is to buy real estate and hold it for a few years, you will end up doing very well overall.

Scott Sheldon is a local mortgage lender; with a decade of experience helping consumers purchase and refinance primary residences, second homes and investment properties. Learn more at www.sonomacountymortgage.com.

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Dynagas Partners: Preferred shares now yield 9.8% (NYSE: DLNG) https://bobsbirdhouse.com/dynagas-partners-preferred-shares-now-yield-9-8-nyse-dlng/ Sat, 12 Nov 2022 16:45:00 +0000 https://bobsbirdhouse.com/dynagas-partners-preferred-shares-now-yield-9-8-nyse-dlng/ SHansche/iStock via Getty Images Introduction Dynagas LNG Partners (NYSE: DLNG) is a shipping company operating six LNG carriers. This class of vessel is currently in high demand due to the energy crisis in Western Europe, but as DLNG has deployed all his vessels under long-term charter contracts at a fixed daily rate, he does not […]]]>

SHansche/iStock via Getty Images

Introduction

Dynagas LNG Partners (NYSE: DLNG) is a shipping company operating six LNG carriers. This class of vessel is currently in high demand due to the energy crisis in Western Europe, but as DLNG has deployed all his vessels under long-term charter contracts at a fixed daily rate, he does not see the advantage of higher spot rates and one-year charter rates. This could change in the third quarter of 2023 when the first LNG carrier will be delivered again after its charter period with Equinor (EQNR) ends and if this vessel could be redeployed at a strong charter rate, Dynagas should see its bottom line and free cash flow increase quite nicely. In previous articles I was focus on preferred stocksand I still think these stocks offer an attractive risk/reward ratio.

Chart
Data by YCharts

The second quarter and the first half were robust

Dynagas’ business model is quite simple. It owns six LNG carriers chartered to three different counterparties.

Logbook of ships

Dynagas Investor Relations

When the war between Ukraine and Russia broke out, there was a lot of uncertainty about the impact of sanctions on LNG carriers. The Yamal LNG project is Russian and three of the vessels were chartered by Gazprom Singapore. Gazprom Singapore was actually a subsidiary of Gazprom Germany, and the German state actually took over the reins of Gazprom Germany, renaming the company SEFE: “Securing Energy For Europe”. And during the September conference call, DLNG management made it clear that the company was in compliance with all regulations.

In addition, the partnership counterparties perform their obligations under their respective charters on time in accordance with applicable US and EU rules and regulations. Our vessels named Clean Energy, Ob River and Amur River are chartered by the former Gazprom Marketing and Trading of Singapore, which was renamed Securing Energy for Europe Marketing and Trading and which we will now call SEFE. SEFE was placed under the control of the German government. SEFE’s parent company has received a loan commitment of around €9.8 billion from the German government. So, effectively, Clean Energy, Ob River and Amur River trade on routes under SEFE guidelines and are no longer sub-chartered by SEFE to Sakhalin Energy.

This article is based on the “as is” situation – assuming that there will be no impact of additional sanctions on Dynagas.

As the charter rates are quite fixed, Dynagas’ financial results are actually quite stable as well and the only variable is the total interest expense, which is increasing under the impetus of rising interest rates in the markets. financial.

Total revenue for the second quarter of the fiscal year was $33.4 million, resulting in net profit of $11.1 million. After deducting preferred dividends, net income attributable to DLNG shareholders was $0.22 (note: this includes a $4.85M gain on derivatives).

income statement

Dynagas Investor Relations

In the image above you can also see that interest charges have started to rise. Q2 interest expense rose around 10% despite a continued effort to reduce gross debt and net debt by hoarding the vast majority of free cash flow to pay down debt.

A very important element in determining whether Dynagas is attractive or not right now is free cash flow. As these LNG carriers have a useful life of several decades, depreciation expense weighs on the reported net income, but is not expected to have a material impact on the free cash flow result as capital expenditure maintenance are quite low (note: Dynagas spent approximately $2.8 million in dry-docking costs).

This is clearly visible in the cash flow statement. Reported cash flow from operations was $8.2 million, but adjusting for changes in working capital position, adjusted cash flow from operations was $17.5 million. dollars. And after deducting capital expenditures of $0.5 million, the free cash flow result was approximately $17 million.

Cash flow statement

Dynagas Investor Relations

The total amount of preferred dividend payments is $2.9 million per quarter, which means that the underlying free cash flow attributable to common shareholders was approximately $14 million. The inflows of cash were fully utilized to reduce net debt and strengthen Dynagas’ balance sheet.

At the end of June, the balance sheet contained $100.2 million in cash and total long-term debt of $539 million for net debt of approximately $439 million. This is just over 50% of the book value of the vessels and I think this book value is quite realistic given that a new LNG vessel currently costs around $240 million.

Balance sheet

Dynagas Investor Relations

The balance sheet is strengthening month by month thanks to the policy of maintaining cash on the balance sheet. It also makes preferred stocks safer: at the end of June, about $280 million in equity was rated below the $130 million in preferred equity. This means that even if Dynagas were to apply a 30% discount to the book value of its vessels (highly unlikely, given the current prices for new vessels, the market value of the vessels is probably a bit higher than the book value) , the shareholders could still be compensated.

Preferred shares are still attractive

In September 2021, I definitely preferred the Series A preferred stock because it offers a fixed preferred dividend of 9% ($2.25 per share, payable in four equal quarterly installments of $0.5625 per share). Series B was attractive but did not offer as much protection as these B shares will soon offer a floating preferred dividend. From November 2023, the quarterly preferential dividend will be set at 3M LIBOR + 5.593%. LIBOR will no longer be used and the quarterly preferential dividend will likely use SOFR 3M as a benchmark.

With the 3M SOFR currently at around 4.20%, the preferred dividend yield could actually be closer to 10%. And in other words: as long as the 3M SOFT exceeds 3.16%, the preferred dividends on Series B will be equal to or greater than the current payouts.

This indeed makes Series B preferred shares more attractive than a year ago. Add to that the fact that 9% yield preferred shares are trading almost 10% below par and the choice becomes a little more difficult. Basically, it boils down to the fact that investors who believe in an even higher 3M SOFR rate should buy Series B. Those who want additional visibility should buy Series A of the preferred shares, trading with (NYSE:DLNG.PA) as a stock symbol.

Investment thesis

While I’m still not interested in initiating a long position in Dynagas common stock, preferred stock is still very attractive. Perhaps even more interesting than a year ago as Dynagas’ balance sheet has become much stronger meaning preferred stocks are now ‘safer’ as there are more common stocks ranking below preferred stock.

Series B of preferred shares will provide an attractive option for speculating on short-term interest rates, but I still prefer the higher-yielding but fixed-rate Series A with a current preferred dividend yield of nearly 10%.

I have no position in Dynagas at the moment, but I like the Series A preferred stock.

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Four pension enhancements that can increase income or savings https://bobsbirdhouse.com/four-pension-enhancements-that-can-increase-income-or-savings/ Wed, 09 Nov 2022 20:18:04 +0000 https://bobsbirdhouse.com/four-pension-enhancements-that-can-increase-income-or-savings/ These add-ons are worth considering, but consider the costs and benefits carefully. Annuities come in different varieties, and each type offers different optional features. Since there are so many jumpers and options, it’s impossible to cover them all in one article. I’ve picked out four that may be particularly useful, depending on your situation and […]]]>

These add-ons are worth considering, but consider the costs and benefits carefully.

Annuities come in different varieties, and each type offers different optional features. Since there are so many jumpers and options, it’s impossible to cover them all in one article. I’ve picked out four that may be particularly useful, depending on your situation and preferences.

A return of premium endorsement (ROP) is an option available with certain fixed rate deferred annuities. Also called multi-year guaranteed annuity or MYGA, this product acts a bit like a bank deposit certificate. You deposit a lump sum and get a guaranteed interest rate for a fixed period, usually two to ten years. Reinvested and compound interest in a non-qualified annuity is tax-deferred.

However, if you cash in your annuity early, during the redemption period, you will pay an early redemption charge, which generally decreases each year, hence the reason for this endorsement.

The ROP endorsement guarantees that you will not receive less than the premium deposit you made from day one, even after early surrender charges and market value adjustments. You get flexibility if life throws you a curveball and you need all your money.

If you choose this option, you will usually get a slightly lower interest rate. For example, one insurer offers a five-year annuity that, from October 2022, pays 4.95% without the rider and 4.70% with it.

Before committing, find out the amount of partial withdrawals without penalty that the annuity would allow. If they are generous enough, you may not need this option.

Three options for fixed indexed annuities

Fixed indexed annuities allow you to capture a portion of stock market gains while providing complete protection against losses. They credit interest based on the annual growth of a market index, like the Dow Jones Industrial Average or the S&P 500. You don’t lose anything in down years.

Depending on market performance and the annuity contract, you may not receive all the benefits in a positive year. This is because there is usually either a fixed capitalization rate, for example, no more than 11% increase in any given year, or a participation rate, such as no more than 60% of the gain of the index during a policy year.

Improved index credit options. With some fixed index annuities, you can buy a higher index capitalization rate or participation rate by paying a small annual fee, often around 1.00% to 1.50% of the allocated assets annually. If the amount of additional interest earned due to the higher cap or participation rate exceeds the fee charged, the decision has been won. If you are optimistic about the long-term stock market, consider this option.

Enhanced Death Benefit Rider typically creates a separate death benefit value that grows at a higher guaranteed annual rate than can be experienced with the actual account value for a number of years. When the annuitant dies, the beneficiary gets the higher of the two values.

As a rule, a small annual fee is charged. For example, an insurer charges 1.15% of assets, which is deducted from the account value. If you want to leave more money for your children, this rider may be worth adding.

Lifetime income rider. This helps generate more guaranteed lifetime income at a future date while giving you full control over your indexed annuity money. Because you don’t set the start date for income payments in advance when you purchase the annuity, you retain planning flexibility. You can choose to start receiving income for life, usually at age 55 or later, just for yourself or for you and your spouse.

Normally, when you convert an annuity into an income stream (“annuity”), its cash surrender value becomes nil. But with this rider, you still own the full unused value of your pension. A huge plus, but there are downsides.

Most insurers charge about 1% per year of annuity assets to add an income rider. Thus, the value of your contract will increase more slowly than without the endorsement.

The amount of lifetime income is determined by the value of the income pool and your gender and age when you start receiving payments. The value of the income account typically grows at a guaranteed annual compound rate of 4-8%, so the longer you wait before you start receiving payments, the higher the income.

The Income Pool Value and the Cash Value of your policy are separate. The Income Pool value is only used to calculate your Guaranteed Income payments. It has no cash value and cannot be withdrawn. On the other hand, the value of the contract can be withdrawn or transmitted to your heirs.

After income begins, annual payments are deducted from the contract value. If this value ever reaches zero, the annual income payments are still guaranteed for the rest of your life, but the annuity would no longer have a cash surrender value.

If you die before the income is activated, your beneficiaries will receive the full value of the annuity contract as a death benefit. If you die after the income is activated, income payments will cease and your beneficiaries will receive any remaining value of the annuity contract.

Lifetime income riders vary widely from one annuity company to another. AnnuityAdvantage’s Income Rider Calculator page provides an instant estimate of the future income you can expect from a lump sum bonus deposit.

The four add-ons covered in this article are optional. Even without one, you’ll still have the powerful benefits of an annuity. Sometimes, however, paying the extra fee for a passenger or feature can be a smart move.

Ken Nuss is the founder and CEO of AnnuityAdvantage, a leading online provider of fixed rate, indexed and lifetime income annuities. Ken is a nationally recognized annuity expert and widely published author. A free rate comparison service with interest rates from dozens of insurers is available at https://www.annuityadvantage.com or by calling (800) 239-0356.

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4 Reasons Why ARMs Are Generally Better Than Fixed Rate Mortgages https://bobsbirdhouse.com/4-reasons-why-arms-are-generally-better-than-fixed-rate-mortgages/ Sun, 06 Nov 2022 19:00:16 +0000 https://bobsbirdhouse.com/4-reasons-why-arms-are-generally-better-than-fixed-rate-mortgages/ Image source: Getty Images Here’s when you should use an ARM. Key points The introductory interest rate on an ARM is lower than the interest rate on a comparable fixed rate mortgage. Due to its lower initial monthly payments, it may be easier to qualify for ARMs and you may qualify for a larger home […]]]>

Image source: Getty Images

Here’s when you should use an ARM.


Key points

  • The introductory interest rate on an ARM is lower than the interest rate on a comparable fixed rate mortgage.
  • Due to its lower initial monthly payments, it may be easier to qualify for ARMs and you may qualify for a larger home loan.
  • ARMs may be best for those who plan to sell their home before the end of the introductory rate term or plan to refinance in a few years.

In the world of mortgages, there are two main types of interest rates: fixed rates and adjustable rates. A fixed rate mortgage maintains the same interest rate for the life of the loan, while an adjustable rate mortgage (ARM) has an interest rate that can change over time. You’ll typically get a lower introductory rate for three to 10 years, then the rate will change each year based on prevailing interest rates. While both have their advantages, ARMs can be better than fixed rate mortgages for several reasons.

1. ARMs have lower introductory interest rates

The initial interest rate on an ARM is generally lower than the interest rate on a comparable fixed rate mortgage. Indeed, with an ARM, the borrower takes on more risk since the interest rate could potentially increase in the future. As a result, borrowers benefit from a lower rate when first taking out the loan.

With mortgage rates having more than doubled since the start of the year, ARMs have become more popular as people look to save on interest and hope that interest rates will come down as inflation subsides. ARM interest rates are typically 0.5% to 1.5% lower than a conventional 30-year mortgage. For a $500,000 home, that can be a savings of $500 per month.

2. ARMS are easier to qualify

In general, it is easier to qualify for an ARM than for a fixed rate mortgage. This is because the interest rate is lower and therefore the monthly payment is lower too. However, lenders will take into account that the interest rate on an ARM may increase in the future when determining whether or not you qualify for the loan.

3. ARMS can help you get a bigger loan

Since ARMs generally have lower interest rates than fixed rate loans, they result in lower monthly payments. This can help you get a higher loan amount because lenders will consider your other monthly payments to determine how much they’re willing to lend you.

4. ARMs allow you to take advantage of lower interest rates

Interest rates have risen 3% so far this year, the biggest increase in 40 years. If you get an ARM now and interest rates drop in the future, you could take advantage of lower interest rates without having to refinance. By avoiding a refinance, you won’t have to pay closing costs, and your interest rate and monthly payment could go down without you having to do anything. However, if interest rates rise, your payments will be higher. It is therefore important to understand the risks of an MRA before deciding to get one.

Check out: We ranked this company as the best overall mortgage lender in our Best-of 2022 awards

More: Our picks for the best FHA mortgage lenders

Who are ARMs used for?

Although ARMs are suitable for a wide range of borrowers, they can be particularly useful for:

  • Homebuyers who plan to sell their home before the end of the introductory rate period
  • Homebuyers who want to keep their monthly payments low during the first years of homeownership
  • Borrowers who want to qualify for a larger loan
  • Borrower who plans to refinance his loan after a few years

Do your research

ARMs typically have lower initial payments, but these may increase after the initial rate period ends. During the 2008 financial crisis, many homeowners saw their interest rates rise and were unable to pay the new monthly payments. Fixed rate loans are usually more expensive upfront, but are more predictable since your payments don’t change.

An ARM could be worth it if you sell the house or pay off the mortgage in 10 years or less. But a fixed rate mortgage would probably work best if this will be your forever home and you want the certainty of a stable interest rate and monthly payment.

Our pick for the best mortgage lender of 2022

Mortgage rates are at their highest level in years and should continue to rise. It’s more important than ever to check your rates with multiple lenders to get the best possible rate while minimizing fees. Even a small difference in your rate could reduce your monthly payment by hundreds.

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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A fixed income roadmap for 2023 https://bobsbirdhouse.com/a-fixed-income-roadmap-for-2023/ Tue, 01 Nov 2022 12:31:58 +0000 https://bobsbirdhouse.com/a-fixed-income-roadmap-for-2023/ From the early days of Ronald Reagan’s first term in the White House, the bond market was in rally mode with only brief interruptions as falling yields drove fixed income prices higher. While a reversal of fortune was likely inevitable, few knew at the start of 2022 that the 30-year rally would come to such […]]]>

From the early days of Ronald Reagan’s first term in the White House, the bond market was in rally mode with only brief interruptions as falling yields drove fixed income prices higher. While a reversal of fortune was likely inevitable, few knew at the start of 2022 that the 30-year rally would come to such a violent end.

“Fixed income returns we’ve seen over the past year are close to the worst on record,” said Neil Sutherland, portfolio manager at Schroders. On the bright side, bond prices have fallen and yields are up. “This suggests that we are looking for better values ​​than what we have seen for some time,” he adds.

That’s not to say fixed income investors should expect smooth sailing. Although we will likely see inflation fall from recent highs, it will be some time before we know how quickly price pressures will subside, and just as importantly, by how much.

If inflation tends to fall back below 5% this winter, the Federal Reserve may not need to raise interest rates as high as some have feared. This could help pave the way for a proverbial “soft landing” for the US economy.

What would constitute a soft landing? Unemployment rates, which are currently below 4.0%, would increase to between 4.5% and 5.0%, but not more, and this rate could support current levels of consumer spending. And in such a soft landing/modest recession scenario, companies would be more likely to maintain their capital spending plans while keeping layoffs to a minimum.

Still, inflation has remained stubbornly persistent, notes Scott Barnard, portfolio manager at Westwood. If metrics such as the consumer price index do not show a steady decline, the Fed may need to raise interest rates for a longer period, perhaps to the point that economic activity contracts in a deep recession.

Rapidly rising global interest rates are already disrupting markets as diverse as housing, autos and pensions. Under these circumstances, the likelihood of “something breaking” increases dramatically, Barnard says. “Look at the UK”

Last month, the Bank of England was forced to inject liquidity into the bond market after UK pension funds deploying so-called liability-driven investment strategies were hit by margin calls. In addition to these challenges, Sutherland adds that “the soaring dollar can also have unintended consequences in the bond market.”

If the economy and markets continue to weaken, investors will also need to consider the “Misery Index”, which combines the inflation rate and the unemployment rate. Bond management firm PIMCO noted in a recent outlook for the year ahead that a rising misery index would portend “a stagflationary shock that will likely hamper the US economy at a time when it is also facing the one of the most rapid tightening of financial conditions since 2008”. financial crisis, generally weak consumer and business sentiment and high uncertainty. All of this raises “the risk of a harder landing for the US economy.”

Sutherland thinks it will be quite difficult for the Fed to engineer a “soft landing.” In the event of a severe recession, Barnard believes longer-dated bonds would rally significantly as growth and inflation expectations begin to decline.

Missing inflation isn’t the only reason the Fed’s credibility is in doubt. At the start of 2022, the central bank forecast that real GDP in the United States would reach around 4.0%. Now that figure appears to be closer to 1.0%, Barnard says.

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Leading mortgage provider raises rates after ECB hike https://bobsbirdhouse.com/leading-mortgage-provider-raises-rates-after-ecb-hike/ Sat, 29 Oct 2022 08:10:38 +0000 https://bobsbirdhouse.com/leading-mortgage-provider-raises-rates-after-ecb-hike/ Non-bank lender, ICS Mortgages, became the first provider to raise rates after the ECB hiked 0.75% this week. ICS will increase its fixed and variable rates for homeowner mortgages by 1%. The increase will apply to all loan-to-value tranches. Rental mortgage rates will also increase by 0.7% to 1.25%, depending on the mortgage product and […]]]>

Non-bank lender, ICS Mortgages, became the first provider to raise rates after the ECB hiked 0.75% this week.

ICS will increase its fixed and variable rates for homeowner mortgages by 1%.

The increase will apply to all loan-to-value tranches.

Rental mortgage rates will also increase by 0.7% to 1.25%, depending on the mortgage product and loan-to-value tranche.

Existing borrowers with a fixed rate will see no change in what they pay.

The changes will take effect from December 1st.

In cases where applicants have received a fixed rate loan offer from ICS, this offer will remain valid after drawdown is complete by November 30.

“These rate increases reflect the changing interest rate environment and the continued upward pressure on the cost of funding fixed interest rate products,” the company said.

“As a prudent and sustainable lender, ICS Mortgages remains committed to providing competitive mortgages and we will continue to review our position on interest rates on an ongoing basis,” he added.

Last month, ICS announced that it was increasing its fixed rates for new customers by 0.5%, following the ECB’s latest rate increase.

It was the third time this year that the lender raised its fixed rates after hikes in March and May.

It is expected that other lenders will soon follow suit following the substantial increase announced by the ECB on Thursday.

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TreasuryDirect tumbles as savers try to buy 9.62% I bonds https://bobsbirdhouse.com/treasurydirect-tumbles-as-savers-try-to-buy-9-62-i-bonds/ Thu, 27 Oct 2022 00:18:44 +0000 https://bobsbirdhouse.com/treasurydirect-tumbles-as-savers-try-to-buy-9-62-i-bonds/ Comment this story Comment With a Friday With maturity approaching, savers trying to buy inflation-protected I bonds — which pay a guaranteed rate of 9.62% — crash a Treasury Department website. You can invest up to $10,000 per calendar year in a Series I savings bond, created to protect against inflation. To purchase and own […]]]>

Comment

With a Friday With maturity approaching, savers trying to buy inflation-protected I bonds — which pay a guaranteed rate of 9.62% — crash a Treasury Department website.

You can invest up to $10,000 per calendar year in a Series I savings bond, created to protect against inflation. To purchase and own an electronic I-bond, you must create an account on the TreasuryDirect website.

To ensure people receive a confirmation email, the Treasury Department told shoppers they had until 11:59:59 p.m. EST Friday to complete their purchase and lock in the rate.

But those who managed to load the website late Wednesday were greeted with this message: “We are currently experiencing unprecedented requests for new accounts and purchases of I Bonds. Due to these volumes, we cannot guarantee that customers will be able to make a purchase by the October 28 deadline for the current price. Our agents are working to help customers who need assistance as quickly as possible.

Get inflation-proof bonds paying 9.62% while there’s still time

So many people are scrambling to make the website deadline, to treasurydirect.govdoes not load, which frustrates buyers.

“After 3 hours I was able to create an account and log in,” wrote a commenter on IsItDownRightNow? website. “I got my emails right away (1:04 and 1:09 PT). Now I’m having trouble loading the purchase page.

This is not the first time the site has crashed. This happened in May when the near 10% rate was announced. The Treasury Department also struggled to keep up with the volume of calls from people having difficulty buying I bonds.

6 key things to know about inflation-linked bonds paying 9.62%

“Due to exceptionally high traffic, the TreasuryDirect website experienced intermittent slowdowns today,” a Treasury Department spokesperson said in an email on Wednesday. “We are in the process of increasing the service capacity of the system and taking other measures in the hope of resolving the problems quickly.”

There are two components to the yield of an I-bond: a fixed rate and an inflation-adjusted rate. The fixed rate of return and the semi-annual inflation rate are announced annually by the Treasury Department at the beginning of May and November. While the fixed rate stays the same for the life of the 30-year bond (and is zero right now), the inflation rate adjusts every six months.

US inflation-linked bonds crashed on TreasuryDirect website

Although inflation is still at historically high levels, the latest data from the Bureau of Labor Statistics shows a slight slowdown. Thus, the inflation-linked part of bond I could see its rate fall in November.

But investors who buy I bonds before Nov. 1 will still benefit from the 9.62% rate for the first six months they hold the bonds.

“We encourage customers to continue to use the website, and we hope the issues will be resolved shortly,” the Treasury spokesperson said.

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Options Available to Offset Rising Mortgage Rates | New https://bobsbirdhouse.com/options-available-to-offset-rising-mortgage-rates-new/ Sun, 23 Oct 2022 20:18:00 +0000 https://bobsbirdhouse.com/options-available-to-offset-rising-mortgage-rates-new/ US homeowners are feeling the pinch as the Federal Reserve continues to raise interest rates to fight inflation. The average rate on a 30-year fixed-rate mortgage rose above 6% this month for the first time since 2008, putting house hunters and homeowners in a bind. The higher rate of fixed rate mortgages is forcing more […]]]>

US homeowners are feeling the pinch as the Federal Reserve continues to raise interest rates to fight inflation.

The average rate on a 30-year fixed-rate mortgage rose above 6% this month for the first time since 2008, putting house hunters and homeowners in a bind.

The higher rate of fixed rate mortgages is forcing more potential buyers to stay on the sidelines of the housing market and continue to rent. Yet rising rates will also hit people with variable-rate mortgages, who periodically adjust their rates based on rate changes for new loans.

While such changes will leave many borrowers helpless, financial advisers say there are several options they can take to offset the pain of rate hikes.

From top to top

The average rate on a 30-year fixed mortgage has more than doubled from a year ago, when it was just 2.86%, according to a recent Freddie Mac survey.

This could cause borrowers to pay vastly more in the long run. For example, the interest paid on a $400,000 30-year home loan would be $200,000, but the total interest at 6.02% would be more than double – $465,000 – according to Bankrate.com’s mortgage calculator. .

Housing is a basic human need, which is why housing is often the biggest expense for many families. Rent or mortgage often takes priority over other essential payments.

It is well known that stagnating wages and student debt have kept many Millennials out of the real estate market. Yet the pressure on indebted senior citizens has also increased. Research from Harvard University’s Joint Center for Housing Studies shows that the share of homeowners aged 62 and older with a mortgage rose from 30% to 41% between 2001 and 2017.

Since mortgages are the primary vehicle for home ownership, managing them is essential for the well-being of all homeowners, young and old.

Fixed vs Variable

Current economic conditions are a clear reminder of the advantages of a fixed rate mortgage over variable rates.

“While a variable rate mortgage may have been advantageous when you first purchased your home, it may not look like clear skies in today’s environment,” said Ryan Bannister, CPA , and owner of 1Up Financial Advisors, which specializes in financial planning for video creators.

“In general, I prefer fixed rate loans, because then you get what you get and it won’t be subject to market fluctuations. New home builders and their lenders sometimes offer great incentives on variable loans. I urge you to do your due diligence and make sure a loan makes sense for the specific home you want.

Achieve refinance

Depending on their situation and the terms of their loan, rising rates may encourage homeowners to seek better rates when refinancing their mortgage.

Rate and term refinancing consists of taking out a new loan to replace the existing one. Ideally, the last loan taken out is better suited to the needs of the borrower, usually offering a lower interest rate or adjusting the term (or duration) of the loan.

“You may want to explore refinancing your mortgage to a fixed rate…that would solve your problem of increased payments,” Bannister said. “But before you jump in, you’ll want to compare the closing costs (usually between 2-6%, depending on the lender) to the amount you’ll save on your payment. For example, if the closing costs you incur when refinancing are greater than the savings you will accumulate over the years you plan to stay in the home, it may not make sense to refinance.

Cash refinancing, on the other hand, allows borrowers to leverage their home to access new lines of credit.

Michael R. Acosta, CFP at Consolidated Planning Inc., said it presents borrowers struggling to repay personal debt with the means to pay it off.

“Consider the following – if a homeowner has $25,000 in outstanding credit card debt where interest rates are rising and tend to be around 19.99% or higher, they have the ability to perform a cash refinance to pay off the debt at the higher rate and basically roll it into their mortgage,” Acosta said.

“Will their mortgage payment go up?” Yes, based on the increase in the outstanding mortgage balance and assuming their interest rate also increases… there is a high probability that the increase in their fixed monthly mortgage payment will increase less than what they were paying for the outstanding balance of their loan,” he said. added.

“It’s not 100% bulletproof, so it makes sense for borrowers to do their homework, speak with a mortgage specialist, and crunch the numbers,” Acosta said.

Rhythm is the thing

Refinancing, however, is not the only option. The frequency of payments is also a key factor.

Bannister recommends looking at bi-weekly payments.

“If your lender doesn’t charge extra for doing this, making bi-weekly payments will require you to make an additional monthly payment every year. This can significantly reduce your loan repayment period if you plan to stay long term,” he said.

Alternatively, if borrowers are close to their loan finish line, they can dig deep to pay it all back in one lump sum.

“Let’s say you’re 28 years old on a 30-year variable rate mortgage and you don’t want to deal with the increased payments, if you have the savings it might be a good idea to pay off the remaining balance of the loan,” Banister said. .

“It really only works in specific scenarios – for example, if you live on a fixed income portfolio and your increased mortgage rate is higher than the interest the portfolio earns. “

Managing mortgage payments can be an arduous and vexing process. Yet rather than simply blindly paying more, savvy borrowers should try to find a way to offset the rising costs incurred in this tough economic climate.

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How to get away with just a mild case of mortgage pain https://bobsbirdhouse.com/how-to-get-away-with-just-a-mild-case-of-mortgage-pain/ Thu, 20 Oct 2022 08:09:08 +0000 https://bobsbirdhouse.com/how-to-get-away-with-just-a-mild-case-of-mortgage-pain/ Comment this story Comment This is the most positive comment I have heard when speaking with UK mortgage specialists this week. The recent turmoil in the government securities market has made securing real estate finance a big deal. One of Britain’s biggest lenders, NatWest Plc, actually hiked rates on its most popular mortgages amid new […]]]>

Comment

This is the most positive comment I have heard when speaking with UK mortgage specialists this week. The recent turmoil in the government securities market has made securing real estate finance a big deal.

One of Britain’s biggest lenders, NatWest Plc, actually hiked rates on its most popular mortgages amid new Chancellor of the Exchequer Jeremy Hunt’s maiden speech in the House of Commons on Monday. It doesn’t take much for risk managers to sound the alarm when interest rates rise as sharply as they have over the past two months. Most mortgage offers are binding for up to six months, so it’s understandable that lenders pull the best deals and wait for the dust to settle before proactively re-competing.

Ten-year gilt yields have more than doubled to around 4% since mid-August. Until Hunt scrapped his predecessor’s tax plans, returns were even higher. The interbank swap market, a benchmark for banks’ fixed-rate transaction funding costs, is around 5% for maturities of one to five years.

Most mortgage offers are now over 6% at face value. A year ago, it was possible for a brief window to get a five-year fixed rate as low as 1%, but base rates were only 0.1%. Those days are long gone, probably forever. Now, many deals are deliberately priced unattractively to avoid bargains, so it’s advisable not to read too much about averages or scary media stories for that matter.

But potential buyers rarely ask for an average offer. They want the lowest competitive rate available. And it’s still possible (via a well-known lender like Nationwide Building Society) to get a five-year fixed deal with an 85% loan-to-value ratio at 5.39%, according to Peter Tsouroulla, head of mortgages at Trinity Lifetime. Partners, a financial advisory firm in London. This rate increases to 5.19% for an even longer fixed term of 10 years (based on a 25-year life mortgage).

But things will eventually calm down.

The real trick, if you can handle the heat of higher interest rates a bit more, seems to be opting for a follow-on mortgage. These are linked to the Bank of England base rate (which is expected to reach at least 3% on November 3) with a credit premium of 0.75 to 1.25% on top. NatWest and Barclays Plc both offer two-year trackers at 3% (this will increase based on base rates). All mortgages revert to lenders’ standard variable rates once the fixed or teaser rate term ends. As these are usually significantly higher than the fixed rate offers being promoted, most are immediately refinanced.

In times of stress, like now, it can become nearly impossible to get a loan if there are unusual complications, such as a small down payment, bad credit history, or irregular employment. Likewise, with rental prices set annually often lagging behind the cost of mortgages, the buy-to-let market has become more illiquid as lenders forgo potentially riskier loans to landlords. With tighter regulations on tenant withdrawal, it has become more difficult to quickly secure the underlying collateral. Lenders are notoriously pro-cyclical in their fears, reducing the flow of capital in bad times and generally overdoing it during good times. So it pays to wait if you can bide your time.

Although official interest rates are unlikely to have peaked, sterling money markets have already priced in much higher levels of around 4.5%, and mortgage lenders have taken all of this into account. . In fact, UK rate expectations are above what most economists believe will eventually peak around 4% and should start falling by 2024.

Naturally, mortgage providers value existing customers with a decent track record; So new borrowers and first-time buyers may find it more expensive than homeowners who are paying down their mortgage. But greed will eventually overcome fear again, when volatility decreases in currency markets. Patience is a virtue if you want to get better financing for a roof over your head.

More from Bloomberg Opinion:

• Truss squanders Thatcher’s legacy with the owners: Thérèse Raphaël

• The UK rental market is broken but not beyond repair: Stuart Trow

• Buying a house now wouldn’t be a bad idea: Teresa Ghilarducci

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. Previously, he was Chief Market Strategist for Haitong Securities in London.

More stories like this are available at bloomberg.com/opinion

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The silver lining of bond market clouds https://bobsbirdhouse.com/the-silver-lining-of-bond-market-clouds/ Tue, 18 Oct 2022 07:21:00 +0000 https://bobsbirdhouse.com/the-silver-lining-of-bond-market-clouds/ DNY59 The sell-off in the bond market was almost unprecedented. The return of the American aggregate bond index (AGG) was -14.6% during the first three quarters of the year. This is one of the worst 9 month streaks ever recorded. In recent stock market sell-offs, fixed-income securities were used to offset losses. Not this time. […]]]>

DNY59

The sell-off in the bond market was almost unprecedented. The return of the American aggregate bond index (AGG) was -14.6% during the first three quarters of the year. This is one of the worst 9 month streaks ever recorded. In recent stock market sell-offs, fixed-income securities were used to offset losses. Not this time.

The Federal Reserve has targeted persistent inflation with sharp and frequent increases in short-term rates – hammering fixed income securities across the credit and maturity spectrum. There was no place to hide. But does that mean the bond market has nothing to offer for the foreseeable future? This article will review bond performance in the context of history to answer this question.

US bond markets generated generally positive returns. The recent 4-decade bond boom was fueled by a secular decline in interest rates, culminating in the zero-interest regime of the pandemic. Today, real and expected interest rates were raised rapidly following aggressive intervention by the Fed.

The following chart illustrates the expected yield (yield to maturity) of 2-year Treasury bills and investment-grade corporate bonds relative to contemporary inflation expectations. This last value is the Cleveland Fed’s 2-year forward inflation forecast based on a combination of market and survey data. Low interest rates in the post-2008 period have rarely offered holders of short-term bonds the opportunity to beat inflation…until very recently.

Chart: The expected yield (yield to maturity) of 2-year Treasury bills and investment-grade corporate bonds versus contemporary inflation expectations.

St. Louis Fed

You will notice that the rapid sell-off in recent months has tilted expected returns decisively ahead of inflation expectations. To many, this seems surprising given reported inflation figures above 8%.

These are just titles. The media usually reports the latest realized inflation compared to the previous 12 months. No problem with that. However, it fails to capture the most recent price trends. The left column of the table below lists rolling 12-month inflation for each month over the past two years. You will notice that this is a smoothed measurement that has consistently stayed above 8%. The current inflation figures are largely attributable to price increases at the start of the year which have not yet passed the 12-month observation window.

The observations in the rightmost column are annualized measures of inflation based on only on the seasonally adjusted monthly price change. It’s much closer to capturing current trends. The last 3 months indicate that inflation is running out of steam after peaking in June.

table: rolling 12-month inflation for each month over the past two years.

BLS

Forward-looking measures of inflation also point to continued price stabilization. The Treasury yield curve and inflation swap market price inflation are in equilibrium over the next 12 months at 2.65%. The aforementioned Cleveland Fed integrates surveys with market data and forecasts a 4.2% increase in CPI over the next year.

In both cases, expected inflation is significantly lower than the overall data presented to the public. 2-year corporate bonds are now yielding over 5%, well above most measures of expected inflation. This part of the yield curve is easily investable. Vanguard offers a constant maturity bond fund with a duration of 2 to 3 years (VCSH). Invesco has a low-cost ETF (BSCO) of bonds maturing at the end of 2024. The latter product’s uniform bond maturity dates largely anchor its residual value.

Of course, it’s time it could be different. A unique artifact of today’s environment is a spike in inflation. We could consider the past behavior of bond markets in the 12 months following previous inflation peaks. The data is at least slightly reassuring. Bonds and equities do not seem to suffer from the “hangover” effects of rapid price increases. In fact, average bond yields exceeded their benchmark yield over the review period.

table: past behavior of bond markets in the 12 months following previous inflation peaks

black rock

Another facet of today’s yield curve is its recent inversion. Short-term rates are now higher than long-term rates. Specifically, the 2-year Treasury yield jumped well above the 10-year yield just a few months ago. It’s the biggest reversal since the dotcom collapse at the turn of the century.

Investors can now invest in high-quality bonds with minimal term structure risk and expect to earn a return above inflation. This opportunity has been missing since the Great Recession.

One might reasonably ask whether current returns are a viable predictor of realized returns over the long term. Of course, no one can predict the evolution of interest rates. But there is evidence that starting yield in the bond market is correlated with future yields. Below is a simple illustration that tracks the observable return of 10-year Treasury bills against subsequent 10-year returns of the Aggregate Bond Index (AGG) – an indicator of high-quality US bonds. His last sighting was in September 2012. There is a lot of correspondence. The best predictor of future returns is current performance.

Chart: Simple illustration that tracks the observable 10-year Treasury yield against subsequent 10-year returns in the Aggregate Bond Index (AGG)

PIMCO, DFA and St. Louis Fed

In summary, today’s US bond market is poised to generate returns that exceed rational inflation expectations. Bond prices today are about as favorable as they have been in 15 years. There are of course no guarantees. But the weight of (admittedly limited) historical evidence suggests that bonds should provide gains that improve investors’ purchasing power.

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