In 2020, interest rates plummeted as the Federal Reserve tried to prevent the economy from crashing due to the pandemic. These low rates helped fuel a real estate frenzy, with many homebuyers locking in 30-year fixed-rate mortgages at sub-3% rates. Now, however, as the Fed has tried getting a handle on inflation, interest rates have soared, including for mortgages.
As of October 11, 2023, the average 30-year fixed-rate mortgage in the US is 7.83%. Many prospective homebuyers are hoping for some relief, but it’s unclear when exactly that will happen. Current homeowners also face high rates. The average 30-year-fixed mortgage refinance rate is 8.02% as of October 11, 2023, according to Bankrate.
Still, many experts think mortgage interest rates will start to trend downward in 2024, although perhaps not at a very fast rate. Below, we’ll break down everything experts think will happen to mortgage rates next year. Start by exploring your mortgage rate options here today to see what you could qualify for.
Mortgage interest rate forecast for 2024
Here’s where experts think mortgage rates will start in 2024, how they think they’ll change and other economic factors to monitor.
Where do experts think mortgage rates will start in 2024?
With the new year just a few months away, and the Fed signaling that rates aren’t likely to come down in the near future, many experts predict that mortgage rates will start the year roughly where they left off.
A hot job market and inflation not coming down as quickly as expected is making it difficult for the Federal Reserve to bring down rates, explains Jeremy Schachter, mortgage loan officer at Fairway Independent Mortgage Corporation.
And while the Fed doesn’t set mortgage rates, there’s a correlation.
“Mortgages and inflation go hand in hand,” says Schachter. “I personally think mortgage rates will begin roughly where we ended in the low 7s.”
Similarly, Robert Frick, corporate economist at Navy Federal Credit Union, predicts 30-year fixed-rate mortgages will start the year in the 7.25%-7.50% range.
Some, however, think rates will continue to climb.
“It has become increasingly evident that rates will be ‘higher for longer’ as economic resiliency persists, and the Fed remains committed to bringing inflation in line with its long-term target of 2%,” says Kelly Miskunas, senior director of capital markets at Better. “Until the market can comfortably assume the hiking cycle is over, we may see mortgage rates continue to drift higher through the early part of 2024.”
If rates do rise higher in the months to come, it may make sense for some buyers to lock in a rate now. See what rates you could qualify for here.
How will mortgage rates change throughout 2024?
While rates might be roughly in line with current levels at the start of next year, give or take a little, some experts predict a stronger drop throughout 2024.
“I personally see mortgage rates coming down into the mid-6s by the second quarter and ending up in the lower 6s or high 5s by the end of the year,” says Schachter.
Frick takes a similar view.
“The economy and inflation should weaken next year, causing the Fed to lower rates,” he says. “This will influence rates overall and should result in mortgage rates at, or just below, 6%.” By the end of 2024, he predicts a range of 5.50%-6.00%.
However, some experts think it will take longer for rates to come down.
“The Fed seems like it will remain unwavering in its fight against inflation,” says Miskunas. “Right now, this is reflected in the futures market with the expectation that the Fed funds rate will not deviate much from where it is right now until mid/late 2024.”
So, until the Fed starts to reverse course on interest rates, mortgage rates might not move much.
“We anticipate that once the Fed has achieved its goals and begins to loosen monetary policy, mortgage rates will decline. This could occur in the latter half of 2024,” says Miskunas.
Economic factors to keep an eye on
Predictions can change as data and circumstances change. So, consider watching out for economic shifts to get an updated idea of where mortgage rates might be heading.
In addition to what the Fed is doing, for example, Frick points to economic indicators such as the spread between the 10-year Treasury and 30-year fixed-rate mortgages.
These two interest rates generally move in the same direction, but how close they are to one another can vary. If the spread starts to close, then that could mean mortgage rates will more closely follow the Fed’s changes.
“The lack of certainty and heightened volatility of 2023 has caused mortgage spreads to widen to historically high levels, but once market participants believe that the Fed’s hiking cycles are over, mortgage rates will improve significantly,” says Miskunas.
Relatedly, data such as monthly jobs reports and the Consumer Price Index (CPI) could also inform where mortgages are heading in 2024. For rates to come down, “we would need to see stronger unemployment numbers and key inflation indicators lower than what was previously shown,” says Schachter. When exactly that will happen is hard to say, but in general, experts predict that mortgage rates will trend downward at some point in 2024 as the economy cools.
Situated on the Pacific Ocean coastline, San Diego is a dream destination for beach lovers and outdoor enthusiasts alike. With a year-round Mediterranean climate, visitors and residents can expect pleasant weather to accompany them on the various adventures the city has to offer. From museums and zoos to beaches and parks, San Diego’s diverse attractions cater to a wide range of interests.
Whether you’re exploring the historic Gaslamp Quarter, catching a Padres game at Petco Park or simply soaking up the sun at La Jolla Cove, San Diego’s unique charm extends far beyond its average salary figures, making it a place where quality of life and experiences are truly priceless.
Choosing where to live, is a little bit more of a complicated decision beyond interests and entertainment opportunities. With the average salary of San Diego sitting around $69,288, it prompts us to break down the cost of living in San Diego and what you can truly afford should you choose to live in this vacation-esque city.
Rent
Rent prices in San Diego range from $2,358 for a studio apartment to $3,765 for a two-bedroom apartment, making the median monthly rent around $3,061. 30% of your income should be allocated for housing, money-saving experts recommend. Our rent calculator, after inputting the salary of $100,000, determined affordable rent to be around $2,500, applying the savings tip.
Transportation
A huge consideration when determining where to live is transportation. Whether you’re commuting to work or venturing out into the social scene, it’s important to know the best ways to get around. The San Diego Metropolitan Transit System provides bus and trolley services across San Diego County and will run you an annual total of $864.
Food
Residents of San Diego aren’t short on food options. This city’s cuisine offerings range from authentic Mexican eats all the way to delicious pizza in Little Italy, with food trucks and farmers markets in between.
Groceries, for an average San Diego family, costs $6,264 annually but most families mix dining in with dining out. The average spend on dining out for a family in San Diego is $4,299 rounding out the total average spent on food $10,563.
Entertainment
Entertainment and other activities are vast in this beach city. Between concerts, beach days, sporting events and social activity hotspots, your free time opportunities are boundless.
On average, visitors and residents spend $48 a day on various activities. Goods and services in San Diego cost 10 percent more than the national average, but are absolutely worth the investment for personal and social growth.
Everything else
“America’s Finest City” has great offerings where spending and prioritizing are flexible to fit your budget with a $100,000 salary. However, the cost of life is a little less flexible if you’re right around the average salary in San Diego, which is again, just below $70,000 per year.
Keep in mind healthcare, taxes and other personalized costs you have to budget for. Sales tax in San Diego is 7.75 percent and the average healthcare costs are 7.2 percent above the national average. Making sure to remember these costs and tacked-on spending is important for saving.
San Diego job market at a glance
San Diego’s largest industries include tourism, technology, healthcare and military, with the U.S. Navy and Marine Corps holding the spot of the area’s largest employer. The job market has scored a 6.7/10 on U.S. News’s job market index, meaning it’s a healthy job market especially when compared to other cities of its size.
The other end of the job market spectrum is understanding the unemployment numbers. San Diego’s unemployment rate has risen a small bit over the last year with it currently sitting at 3.9% where it was at 3.4% last year. The U.S. unemployment rate is 3.8% meaning San Diego sits right alongside the national rate.
Settle down in San Diego
While it’s true that San Diego offers a vibrant lifestyle with numerous amenities, the cost of living can quickly diminish your income. To make the most of a $100,000 salary (or less) in this beautiful coastal city, individuals and families need to budget wisely, prioritize their spending and consider alternative strategies like investing and prioritizing what’s important.
If you’re looking to thrive in San Diego and strike the right balance between financial stability and enjoying all that this unique city has to offer, start and end your search with our list of apartments for rent.
Wesley is a Charlotte-based writer with a degree in Mass Communication from the University of South Carolina. Her background includes 6 years in non-profit communication and 4 years in editorial writing. She’s passionate about traveling, volunteering, cooking and drinking her morning iced coffee. When she’s not writing, you can find her relaxing with family or exploring Charlotte with her friends.
There are a lot of what I call “business edge-cases” in the post-pandemic world we live in right now, and moving compares are definitely among the most interesting.
Why? Because the US government hasn’t given a federal mandate on what constitutes an “essential business”, yet moving companies are generally subsumed by their description of “transportation” as being an essential service.
And while many foreign governments have put freezes on evictions and rent payments as safety measures, the United States is all over the place, often erring on state-by-state or even county-by-county regulations.
What does that mean for local moving companies? Well, it means like most small businesses, they will be hit hard, but they will likely still need to stick around because, without a rent freeze, the government has forced them to figure ways to stay in business. People, unfortunately, will still need to move.
But will most moving companies even be able to stay in business? Even by ignoring the danger aspect, it will be a tall task.
We released a study that looked at the last time the government was hit this hard, in 2008 during the Great Recession, and what happened to moving companies. They used the four metrics of local mover revenue, how many remained open, employment numbers, and payroll amount. Here is what happened in 2008:
Revenue: -16.5%
Establishments: -17.2%
Employment: -12.8%
Payroll: -11.3%
The study cites another by the American Moving and Storage Association (AMSA) that found it took roughly four years for those numbers to return to the previous normal.
How do those four numbers compare to what we are seeing during COVID-19? Well, we don’t know yet, because it’s only been a few months. But the study did look at the overall GDP and unemployment numbers in 2020, and the numbers line up fairly similarly to the drop in GDP and employment in 2008, which makes this a relatively comparable situation.
Could there be a quick turnaround? Sure. But another problem is that the biggest reasons people cite for moving in migration studies: new jobs, buying a home, etc., are all also experiencing major downturns.
Which means putting it all together, much like other struggling businesses, this study doesn’t think it’s at all unreasonable to see a drop between 6% to 9% reduction in the moving industry over the next several years, despite the fact that it’s more or less an essential service. That’s a huge number, which they estimate to be between $1.5 to $2.5 billion in revenue.
This is to be expected given that people shouldn’t be moving right now if they can help it, but without the aid of the government at a federal level, this pattern holding true will be a huge problem for not just these small businesses, but for literally anyone who has a lease-up at any point during the pandemic.
Some US households may want to do some budgetary belt tightening for the 11th time in 17 months. The Federal Reserve has boosted interest rates which means items like mortgages, credit cards, car loans and student debt costs will be higher. And Fed Chair Jerome Powell hinted at the possibility of another increase in the near future. I would say it is certainly possible that we would raise funds again at the September meeting if the data warranted. And I would also say it’s possible that we would choose to hold steady at that meeting. Long story short, the FED wants these interest rate hikes to bring down inflation if you continue to get inflation reports. Like the one that we got in June, that’s enough evidence for FED officials to pause, maybe pause for an extended period of time. Inflation has been pulling off recently, but not enough for the FED, partly because the US labor market remains strong and for the overall US economy lower than usual, unemployment numbers can be seen as *** blessing and *** curse can’t have *** recession if we’re creating lots of jobs and that’s what we’re doing right now. So recession risks are high but I think we have *** fighting chance to get through all this without actually suffering one. I’m John Lawrence reporting.
Hearst Television participates in various affiliate marketing programs, which means we may get paid commissions on editorially chosen products purchased through our links to retailer sites. This may influence which products we write about and where those products appear on the site, but it does not affect our recommendations or advice, which are grounded in research.
Mobile app users, click here for the best viewing experience.
BALTIMORE — The painful environment for Baltimore homebuyers continues: Mortgage rates surged above 7% last week following the latest quarter-point rate increase from the Federal Reserve. And that’s not all: The Fed signaled that this might not be the last rate hike of this cycle after all, despite earlier predictions to the contrary.
Video above: Inflation remains major concern for Federal Reserve
This most recent Fed rate hike brought the benchmark borrowing rate — that is, the interest on lending between banks — to 5.25%-5.5%. That’s its highest level in 22 years.
The Fed has raised the federal funds rate 11 times in the past 17 months in its attempt to bring inflation under control. The moves appear to be working: There have been positive economic signals in recent weeks regarding both consumer prices and the labor market. But Fed Chair Jerome Powell cautioned that officials don’t want to give too much weight to a single month of data.
So, what does that mean for you? When the federal funds rate goes up, interest rates on products like mortgages tend to go up, too. And, since the Fed indicated it’s weighing another hike in September, mortgage rates will likely stay high for a while longer.
As it stands, the average for a 30-year fixed-rate mortgage is 7.05%, while the average 15-year fixed-rate mortgage is at 6.40%, according to Mortgage News Daily. The average for a jumbo mortgage stands at 7.10%, and the average for a 5/1 ARM, meanwhile, is 6.95%. Nonetheless, it is possible to find better mortgage rates by considering offers from various lenders, springing for discount points, and improving your credit score.
Baltimore housing market trends
The market is particularly competitive for single family homes and condos in Baltimore right now. Even though inventory remains tight, prices are either up or stable pretty much across the board, thanks to bidding wars over the few properties that do go on the market.
In June (the most recent month with complete data), the median sale price for houses was up 1.9% from 2022, while the median for condos was up 1.8%, according to Redfin. The median price for Baltimore’s iconic rowhouses, on the other hand, was flat, sticking at $215,000 year over year (note that the data includes other types of dwellings that are considered townhouses, too).
Redfin gives the city of Baltimore a “Compete Score” of 67 (with 100 being the most competitive score) right now. For comparison, Bowie has a Compete Score of 78 and Washington, D.C., has a Compete Score of 55. Homes are selling, on average, for 1% above list price, with homes in the hottest neighborhoods regularly selling for 3% above list price.
National housing market trends
Home prices are up 2.6% year-over-year, according to Redfin’s latest housing market report — the largest increase since November. Inventory not only remains incredibly tight, it’s also falling especially fast: It shrunk 17% over July 2022, the biggest drop in 18 months.
Mike Fratantoni, senior vice president and chief economist with the Mortgage Bankers’ Association, expressed optimism that things could turn around later in 2023, if this ends up being the last rate hike.
“While the market for new home sales has recovered considerably over the past few months, the pace of overall housing market activity remains quite slow,” Frantantoni said. “We do expect mortgage rates to trend down once the FOMC clearly signals that they have reached the peak for this cycle, as the reduction in uncertainty with respect to the direction of rates should narrow the spread of mortgage rates relative to Treasury benchmarks.”
Ready to move on anyway? Many real estate pros are dredging up the old adage, “Date the rate, marry the house.” Translation: If you see your dream home now, you don’t necessarily have to pass it by while waiting for a better mortgage rate in the future. Consider taking out a mortgage now knowing that you’ll refinance once rates drop.
Just a three-quarter point drop is enough to make refinancing worth it. And, as you look for the best possible rate right now, make sure you compare offers among multiple lenders. Just getting quotes from four lenders can save you up to $1,200 every year on your mortgage, according to a study by Freddie Mac.
30-year fixed mortgage interest rates
On average, the interest rate for a 30-year mortgage on July 31 was 7.05%, up from 6.99% on July 24.
15-year fixed mortgage interest rates
On average, the interest rate for a 15-year mortgage on July 14 was 6.40%, up from 6.35% on July 24.
Jumbo mortgage interest rates
On average, the interest rate for a 30-year fixed rate jumbo mortgage on July 31 was 7.10%, up from 6.98% on July 24.
5/1 adjustable-rate mortgages
On average, the interest rate for a 5/1 ARM on July 31 was 6.95%, down from 6.96% on July 24.
What determines mortgage rates?
Mortgage rates are influenced by a variety of factors, including:
Your credit score
Down payment
Your debt-to-income ratio (DTI)
The type of loan you’re getting
Loan term
Interest rate type (fixed vs. adjustable)
Inflation and the overall economy
The Federal Reserve (which doesn’t set mortgage rates, but it certainly influences them)
APR vs. interest rate
If you’re currently shopping for a mortgage or considering refinancing, you’ve probably wondered why the quoted interest rate isn’t the same as the APR. That’s because the loan’s interest rate is what you pay the lender to borrow the money, while the APR (annual percentage rate) encompasses both the interest rate and all loan-related fees. Loan-related fees can include:
Mortgage broker fees
Loan origination fees
Mortgage insurance premiums
Some closing costs
The APR, therefore, is a truer measure of what it will actually cost you to borrow money to buy a home.
Editorial Disclosure: All articles are prepared by editorial staff and contributors. Opinions expressed therein are solely those of the editorial team and have not been reviewed or approved by any advertiser. The information, including rates and fees, presented in this article is accurate as of the date of the publish. Check the lender’s website for the most current information.
This article was reviewed by Lauren Williamson, who serves as the Home and Financial Services Editor for the Hearst E-Commerce team. Email her at [email protected].
If you have a mortgage, you may be unknowingly participating in a mortgage-backed security (MBS). That is, your humble home loan may be part of a pool of mortgages that has been packaged and sold to income-oriented investors on the secondary market.
Being part of an MBS won’t change much (if anything) about how you repay your home loan, but it’s helpful to understand how these investment products work and how they impact the mortgage and housing industries.
Key takeaways
A mortgage-backed security is an investment product that consists of thousands of individual mortgages.
Investors can purchase MBSs on the secondary market from the banks that issued the loans.
When MBS prices fall, residential mortgage rates tend to rise – and vice versa.
What is a mortgage-backed security?
A mortgage-backed security (MBS) is a type of financial asset, somewhat like a bond (or a bond fund). It’s created out of a portfolio, or collection, of residential mortgages.
When a company or government issues a traditional bond, they are essentially borrowing money from investors (the people buying the bond). As with any loan, interest payments are made and then principal is paid back at maturity. However, with a mortgage-backed security, interest payments to investors come from the thousands of mortgages that underlie the bond — specifically, the repayments in interest and principal the mortgage-holders make each month.
Mortgage-backed securities offer key benefits to the players in the mortgage market, including banks, investors and even mortgage borrowers themselves. However, investing in an MBS has pros and cons.
How do mortgage-backed securities work?
While we all grew up with the idea that banks make loans and then hold those loans until they mature, the reality is that there’s a high chance that your lender is selling the loan into what’s known as the secondary mortgage market. Here, aggregators buy and sell mortgages, finding the right kind of mortgages for the security they want to create and sell on to investors. This is the most common reason a borrower’s mortgage loan servicer changes after securing a mortgage loan.
Mortgage-backed securities consist of a group of mortgages that have been organized and securitized to pay out interest like a bond. MBSs are created by companies called aggregators, including government-sponsored entities such as Fannie Mae or Freddie Mac. They buy loans from lenders, including big banks, and structure them into a mortgage-backed security.
Think of a mortgage-backed security like a giant pie with thousands of mortgages thrown into it. The creators of the MBS may cut this pie into potentially millions of slices — each perhaps with a little piece of each mortgage — to give investors the kind of return and risk they demand. Mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages underlying them.
Types of mortgage-backed securities
Mortgage-backed securities may have many features depending on what the market demands. The creators of MBSs think of their pool of mortgages as streams of cash flow that might run for 10, 15 or 30 years — the typical length of mortgages. But the bond’s underlying loans may be refinanced, and investors are repaid their principal and lose the cash flow over time.
By thinking of the characteristics of the mortgage as a stream of risks and cash flows, the aggregators can create bonds that have certain levels of risks or other characteristics. These securities can be based on both home mortgages (residential mortgage-backed securities) or on loans to businesses on commercial property (commercial mortgage-backed securities).
There are different types of mortgage-backed securities based on their structure and complexity:
Pass-through securities: In this type of mortgage-backed security, a trust holds many mortgages and allocates mortgage payments to its various investors depending on what share of the securities they own. This structure is relatively straightforward.
Collateralized mortgage obligation (CMO): This type of MBS is a legal structure backed by the mortgages it owns, but it has a twist. From a given pool of mortgages, a CMO can create different classes of securities that have different risks and returns (like different size slices, if we use our pie metaphor again). For example, it can create a “safer” class of bonds that are paid before other classes of bonds. The last and riskiest class is paid out only if all the other classes receive their payments.
Stripped mortgage-backed securities (SMBS): This kind of security basically splits the mortgage payment into two parts, the principal repayment and the interest payment. Investors can then buy either the security paying the principal (which pays out less at the start but grows) or the one paying interest (which pays out more but declines over time). These structures allow investors to invest in mortgage-backed securities with certain risks and rewards. For example, an investor could buy a relatively safe slice of a CMO and have a high chance of being repaid, but at the cost of a lower overall return.
How do mortgage-backed securities affect mortgage rates?
The cost of mortgage-backed securities has a direct impact on residential mortgage rates. This is because mortgage companies lose money when they issue loans while the market is down.
When the prices of mortgage-backed securities drop, mortgage providers generally increase interest rates. Conversely, mortgage providers lower interest rates when the price of MBSs goes up.
So, what causes mortgage-backed securities to rise or fall? Everything from stock market gains to higher energy prices and even unemployment numbers have the ability to influence the prices. A variety of factors that affect the course of mortgage-backed securities, and lenders are constantly monitoring it.
Mortgage-backed securities and the housing market
Why do mortgage-backed securities make sense for the players in the mortgage industry? Mortgage-backed securities actually make the industry more efficient, meaning it’s cheaper for each party to access the market and get its benefits:
Lenders: By selling their mortgages, lenders save on maintenance costs, and receive money they can then loan out to other borrowers, allowing them to more efficiently use their capital. They often require borrowers to meet conforming loan standards so that they can sell mortgages to aggregators. They can also sell the loans they might not want to keep, while retaining those they prefer.
Aggregators: Aggregators package mortgages into MBSs and earn fees for doing so. They may give mortgage-backed securities features that appeal to certain investors. A steady supply of conforming loans allows aggregators to structure MBSs cheaply.
Borrowers: Because aggregators demand so many conforming loans, they increase the supply of these loans and push down mortgage rates. So, borrowers may be able to enjoy greater access to capital and lower mortgage rates than they otherwise would.
Of course, easier access to financing is beneficial for the housing construction industry: Developers can build and sell more houses to consumers who are able to borrow more cheaply.
Investors like mortgage-backed securities, too, because these bonds may offer certain kinds of risk exposure that the investors, mainly big institutional players, want to have. Even the banks themselves may invest in MBSs, diversifying their portfolios.
While the lender may sell the loan, it may also retain the right to service the mortgage, meaning it earns a small fee for collecting the monthly payment and generally managing the account. So, you may continue to pay your lender each month for your mortgage, but the real owner of your mortgage may be the investors who hold the mortgage-backed security containing your loan.
Pros and cons of investing in MBSs
No investment is without risk. MBS have their advantages and disadvantages.
For instance, mortgage-backed securities typically pay out to investors on a monthly basis, like the mortgages behind the securities. But, unlike a typical bond where you receive interest payments over the bond’s life and then receive your principal when it matures, an MBS may often pay both principal and interest over the life of the security, so there won’t be a lump-sum payment at the end of the MBS’ life.
Here are some of the other advantages and disadvantages of investing in MBSs.
Pros
Pay a fixed interest rate
Typically have higher yields than U.S. Treasuries
Less correlated to stocks than other higher-yielding fixed income securities, such as corporate bonds
Cons
If a borrower defaults on their mortgage, the investor will ultimately lose money
The borrower may refinance or pay down their loan faster than expected, which can have a negative impact on returns
Higher interest rate risk because the cost of MBSs can drop as soon as interest rates increase
History of mortgage-backed securities
The first modern-day mortgage-backed security was issued in 1970 by the Government National Mortgage Association, better known as Ginnie Mae. These mortgage-backed securities were actually backed by the U.S. government and were enticing because of their guaranteed income stream.
Ginnie Mae began providing mortgage-backed securities in an effort to bring in extra funds, which were then used to purchase more home loans and expand affordable housing. Shortly after, government-sponsored enterprises Fannie Mae and Freddie Mac also began offering their version of MBSs.
The first private MBS was not issued until 1977, when Lew Ranieri of the now-defunct investment group Salomon Brothers developed the first residential MBS that was backed by mortgage providers, rather than a federal agency. Ranieri’s MBSs were offered in 5- and 10-year bonds, which was attractive to investors who could see returns more quickly.
Over the years, mortgage-backed securities have evolved and grown significantly. As of May 2023, financial institutions have issued $493.9 billion in mortgage-backed securities.
Mortgage-backed securities today
While mortgage-backed securities were notoriously at the center of the global financial crisis in 2008 and 2009, they continue to be an important part of the economy today because they serve real needs and provide tangible benefits to players across the mortgage and housing industries.
Not only does securitization of mortgages provide increased liquidity for investors, lenders and borrowers, it also offers a way to support the housing market, which is one of the largest engines of economic growth in the U.S. A strong housing market often bolsters a strong economy and helps employ many workers.
Mortgage Market
Bankrate insights
As of 2021, 65% of total home mortgage debt was securitized into mortgage-backed securities.
Bottom line on mortgage backed securities
While you might not deal with a mortgage-backed security in your daily life, your mortgage may be part of one. And if so, it’s a cog in the machinery that keeps the financial system running and helps borrowers access capital more cheaply. It can be useful to understand that the MBS market ultimately has a powerful influence over qualifications for mortgages, resulting in who gets a loan — and for how much.
As unemployment numbers continue to rise, many employees are stressed about whether they’ll have a job next week or not. Some have already, some have already lost their jobs and are scrambling to find new employment. In this time financial planning is crucial. This is a time when people are feeling and are desperately in need of guidance. If you think that you are about to encounter a layoff, you need to be focusing your attention on what can be controlled: cutting expenditures, figuring out emergency funds, evaluating how to replace lost benefits, and making a game plan for the job search.
1. Save Emergency Cash
For those that are still employed but the future of their job is uncertain, I would encourage them to have at least 12 months of savings in cash. Unfortunately many will not have enough. But if they’re still employed and the emergency funds are not there, tapping into their 401(k) might be a viable option. I know what you’re thinking. Tapping into your 401k usually goes against all that I stand for. And with this dismal market, it might be a dangerous move, but; if they become unemployed that option might now be available to them.
Typically if you’re still employed you’re allowed borrow up to half of your 401(k) balance, up to a maximum of $50,000. Running these numbers you can guesstimate the period of how long you think it will take you to find a new job and then how much you would need to borrow to get you by until the new job is made. If you borrow from your 401k while you are still employed then you avoid the 10% withdrawal penalty. Sure there is some speculation in this move, but if you’re in a high demand field you may be able to use this move to your advantage.
Warning: If you do this, be sure to double check with your employer when you are due to pay it back. It tends to vary from employer, but it could be due back immediately, within 60 days or some period greater.
2. Don’t Pay Off Debt
Another common misconception of after being laid-off is that most people want to take their savings or take their retirement savings and pay off debt, such as credit cards or even the 401(k) debt. But in this type of market, paying off debt should not be the priority especially if you are unemployed. The priority is to keep get your savings intact and making sure that you have plenty of cash on hand. Sure credit card debt is bad, but just focus on making the minimum payment until you get your job situation in check.
3. Focus On Crisis Budgeting
If you’re used to going to shopping every weekend or eating out every other night at fancy restaurants, then most likely those changes are just around the corner. You need to sit down and seriously hammer out a budget of things that you need and things that you don’t need.
You may even consider working out two budgets, one for while you’re working and one for when you’re not working, so that way you can truly see how much you’re spending per month. And then, you can contemplate whether you can go on a cheaper cell phone plan, or cut your cable bill services. Sometimes adding that extra payment per month might not seem like a big deal, but $50 here and $50 there will surely add up, especially on a limited budget. Also, too, knowing which expenses you absolutely must be covered will help you realistically search for your future job.
4. Replace Lost Benefits
In the aftermath of a job loss, people should take stock of what benefits have been lost, which ones you are entitled to by law, and which ones may be portable. how to continue health care coverage, especially if there are dependents.
Typically, employees are eligible to keep the same coverage through COBRA for at least 18 months. But, they may have to pay 102% of the cost of their insurance premium. If there premium have been subsidized by their employer, then that cost will be a rude shock. COBRA can often be a good bridge choice, but it ends up being a health benefit. Families paying $200 a month for insurance under COBRA, it could be $1,000. Luckily, the government just passed new law concerning COBRA benefits that qualifying period will be only responsible to pay for 35% of the benefit. This comes at a time that should be very helpful to many that are facing layoffs ahead.
Many employers offer life insurance, long-term care insurance, disability policies and they may be portable as well. For another person or one who is not in good health, ability to take over the payments on existing $100,000 life insurance policy may save the worry of having to find another carrier. It’s better to keep it for a few months, although make sure they don’t need it, and drop it later.
5. Consider a Career Transition
Many people will be forced by an unforeseen job layoff to reassess what they want in their lives and what is meaningful to them. They may have to craft resumes, cover letters for the first time in years, and feel at a loss especially if they are switching to a new career path, which is an unfamiliar field.
If you haven’t jumped on the social media bandwagon, it’s time. Consider Facebook, LinkedIn, Twitter and other social media sites to reconnect with old networks and also create new ones. The more people that know your situation the better. Also, consider starting a blog to showcase your talents. Need a good blog for inspiration? Guess what, you’re already here.
Global economic downturns are sure to affect everyone to some extent. This year has seen record unemployment numbers and job losses, which have disproportionately affected women and especially women of color. This is a unique situation to the 2020 economic recession, which is why many are calling it the âshe-cession.â We took a closer look
The post Navigating the She-Cession: The Intersectionality of Economic Uncertainty appeared first on MintLife Blog.
The economy is still in the doldrums, but one of the side effects has been that the rates on home mortgages are at their lowest levels ever. Last week 30 year fixed mortgages reached historic lows when they breached an average of 3.53%. Not only that, but 15 year fixed mortgages averaged only 2.83%! From […]
The average unemployed worker has been out of work for 35.2 weeks, and the number has been climbing steadily for over a year. Despite this crisis, last week, Congress went home without passing another emergency extension of unemployment benefits. This affects 1.2 million workers: they will no longer collect unemployment checks, but thereâs no evidence that losing their benefits will spur them to get a job any faster in a depressed economy.
The post When Unemployment Benefits Run Out appeared first on MintLife Blog.
Youâve probably heard unemployment rates talked about often in the news, especially over the last year, as the COVID-19 pandemic brought the economy to a halt, and tens of millions of Americans ended up without work. Many people also have personal experience with unemployment, whether because they lost a job themselves or someone close to
The post Understanding the Main Types of Unemployment appeared first on MintLife Blog.