Reports released this week by several respected market observers point to less good and increased bad and ugly ahead for the housing market.
For some of the good, a U.S. Census Bureau report released late last week spurred a bout of optimism when it revealed that new-home sales jumped by nearly 11% month-over-month in May on a seasonally adjusted basis, after declining by 12% in April.
Moody’s Investors Service, in a housing-market report released this week, puts some ugly back into the home-sales figures for May, however.
“At 696,000 units, May new home sales were around 17% below the recent peak of 839,000 units in December last year,” the Moody’s report notes. “[On June 21], the National Association of Realtors said that existing-home sales declined for the fourth consecutive month.
“Existing-home sales fell in May by 3.4% on a seasonally adjusted basis to 5.41 million, the lowest since June of 2020 and similar to pre-pandemic levels.”
Those figures, along with “sharp recent increases in mortgage rates” and other supporting data, lead Moody’s to conclude that the “U.S. home-price boom is over.” The firm, which rates securitization offerings and provides other capital-market services, predicts “material declines” in both new- and existing-home transactions this year, compared with 2021.
Supporting the ugly outlook for the housing market is the release today, June 29, of the quarterly CFO Survey, conducted jointly by Duke University’s Fuqua School of Business and the Federal Reserve Banks of Richmond and Atlanta. The survey of more than 300 U.S. financial executives conducted between May 25 and June 10, shows optimism about the broader U.S. economy continuing to decline.
The average index score for the current survey was 50.7, compared with 54.8 in the prior quarter and 60.3 two quarters ago.
“Price pressures have increased, real revenue growth has stalled and optimism about the overall economy has fallen sharply,” said John Graham, a Fuqua finance professor and the survey’s academic director. “Monetary tightening [by the Federal Reserve] is one of several factors dampening the economic outlook.”
The CFO Survey’s findings are echoed by a revised first-quarter 2022 gross domestic product (GDP) estimate released Wednesday by the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA). It shows that a drastic economic slowdown is already underway.
“Real gross domestic product [a measure of all goods and services produced in the economy] decreased at an annual rate of 1.6 percent in the first quarter of 2022 …,” the BEA report states. “In the fourth quarter of 2021, real GDP increased 6.9 percent.”
The BEA’s first-quarter GDP estimate, it’s third to date, was revised downward from -1.4% and -1.5% in the two prior estimates. The grim data led Mortgage Capital Trading (MCT), a San Diego-based capital market software and services firm, to broach the “R“ word in its daily market-overview report.
“Concern over a slowing economy and aggressive interest rate hikes from the Fed are beginning to dominate market sentiment,” the MCT report states. “This morning’s GDP release [on June 29] came with a downward revision for the last reading, further supporting views that a recession is either in progress or coming soon.”
What does all this mean for the housing market in the months ahead? The Moody’s report attempts to frame some of the expectations.
“We expect some increases in existing-house prices over the next 18 months, though for appreciation to be well below the general rate of inflation,” the Moody’s report states. “After that, we expect home appreciation to settle in at levels somewhat lower than the rate of overall U.S. inflation.”
The report even indicates that there “is risk that existing home prices will have a minor correction over the next two years, similar to housing markets in many other developed counties facing risks after recent booms.”
The “moderation” in the U.S. housing market is ongoing and the full effects of recent rate increases have yet to be fully realized, the Moody’s report adds, especially with respect to housing prices.
Moody’s predicts that housing demand will “dampen significantly” in the months ahead due to the doubling of rates for 30-year fixed mortgages since the start of the year, which is fueling a huge jump in monthly mortgage costs. Freddie Mac’s most recent Primary Mortgage Market Survey shows the average 30-year fixed rate mortgage at 5.81% as of June 23.
“The monthly costs of new mortgages on existing homes sold at median transaction prices [are] more than 60% higher than a year ago,” the Moody’s report states. “Although higher mortgage rates do not always drive home prices lower, they typically affect sales activity and drive down the rate of price appreciation.
“We also expect higher rates to restrict for-sale supply because current homeowners will be reluctant to lose low-rate fixed borrowing costs.”
So, in effect, moderating or even declining home prices could be neutralized by rising borrowing costs, leading the housing market toward stagnation — the doldrums — in the worst-case scenario.
There is some good news mixed in with all this bad and ugly, however. Moody’s points out that some “fundamental housing strengths” will likely help to mitigate the degree of any market correction, at least over the next 12 to 18 months.
Those strengths include “favorable demographic trends, solid underwriting of outstanding mortgages and lingering housing supply constraints from a period of underbuilding,” according to the Moody’s report. Also on the bright side, according to Moody’s, is that a moderate decline in housing prices could be good for the market longer-term. That’s assuming the Federal Reserve wins the fight to tame inflation, now running at 8.6%, without causing a major spike in unemployment, which was at 3.6% in May for the third month in a row, according to the Bureau of Labor Statistics.
In short, the housing market has reached a fork in the road, based on the Moody’s analysis — with one path leading to the doldrums, or even decline, and the other toward resurgence and a new normal.
“If U.S. home prices were to decline modestly, it would increase affordability for potential homebuyers and improve demand, including for individuals who were priced out of the market in the recent months because of rapidly rising interest rates,” Moody’s reasons in its report. “However, sustained large increases in mortgage rates or a material weakening in the labor market could lead to sharper declines in housing activity and prices.”
With some recent upward pressure on mortgage rates, a lot of folks are beginning to wonder if home prices are going down? And if this is the end of the housing boom.
The thought is further compounded and perhaps supported by the fact that the housing market has been absolutely bonkers lately.
After all, property values are up something like 20% over the past 12 months, and easily at all-time highs.
Surely there has to be a respite following such impressive growth, especially if financing is now more expensive too. Right?
Unfortunately, for you prospective home buyers out there, this might be little more than wishful thinking.
The Fundamentals That Made the Housing Market Red Hot Are Still at Play
Home prices were up 18.1% in August 2021 compared with August 2020, per CoreLogic
There are still not enough homes for sale and far too many buyers
This has created an enduring seller’s market that is expected to persist through at least 2022
But home prices are only forecast to rise 2.2% from August 2021 to August 2022
Typically, you need a catalyst for a trend to reverse course. With regard to home prices, this might be a big increase in mortgage rates, a growing housing stock, or some other negative event.
In the prior housing downturn around 2008, the issue was massive oversupply. Home builders simply constructed way too many homes.
Many of these communities were built on the outskirts of metropolitan areas where nobody really wanted to live.
And while that was happening, lots of homeowners took out unsustainable mortgages that they eventually defaulted on.
Home prices didn’t just magically fall one day because they had gone up too much. There were clear drivers that preceded the decline.
You can argue that higher mortgage rates could be a catalyst, but that alone probably isn’t enough, especially when you consider how cheap they still are.
The monthly payment on a $350,000 loan amount rises from $1,429 (at 2.75%) to $1,523 (at 3.25%) on a 30-year fixed. That’s not a huge difference considering the dollar isn’t what it used to be.
Sure, interest rates can go even higher than that, but I don’t know how much that dampens the rally.
Ultimately, there hasn’t been a clear, inverse correlation between mortgage rates and home prices. That is to say that if one goes up, the other goes down.
There have actually been times when both have risen in tandem, or both have fallen together.
This is possible if the economy is improving, which pushes interest rates up to stem inflation, while also boosting wages and generating a larger number of higher-paid home buyers.
Home Price Gains May Moderate, Especially During Fall and Winter
It’s important to point out the distinction between falling home prices and decelerating home price gains.
They are two very different things. For example, home prices probably won’t go up 20% in 2022.
However, they may still rise another 5-10% from 2021 levels. This means home prices are still going up, just not as much as they once were.
One also has to consider the time of year – it’s pretty common for the housing market to slow down during the colder months in fall and winter.
Simply put, fewer people are looking to purchase homes during these months, and most homeowners aren’t looking to sell either.
It probably tips more toward a buyer’s market during these months, so you might see some negative headlines regarding the housing market.
If mortgage rates also rise during this time, you could see some outright fearmongering about the housing market.
But then spring hits, the housing market gets back into gear, and all of a sudden you’ve got bidding wars again.
There could even be more pressure to buy a home next year before the low mortgage rates are really gone forever.
Where Have Home Prices Risen the Most Lately?
When attempting to spot a correction, you might look at where home prices have risen the most. While it isn’t necessarily sound logic, it’s something to consider nonetheless.
Leading the pack was Phoenix, which experienced an insane 30.9% increase in home prices from August 2020 to August 2021, per the CoreLogic HPI.
The next biggest gainer was San Diego, CA with a 23.2% gain, followed by Las Vegas with a 22.2% jump.
Rounding out the top five were Denver (+19.5%) and Los Angeles (+14.9%). But similar to the stock market, the rich often get richer.
Just look at a Tesla or Apple or Amazon stock, which just keep going up and up while the laggards, well, lag.
These cities might just even more expensive until eventually hitting a wall at some point.
As an example, San Diego home prices are expected to increase an additional seven percent over the next 12 months.
What Housing Markets Are Most at Risk of Falling Home Prices?
Again, similar to the stock market, the big brands seem to weather storms better than the mid-market players.
So even during a crisis, they’ve got a buffer that keeps them somewhat insulated. As such, the top five metros most at risk of a home price decline aren’t on CoreLogic’s top gainers list.
They include Springfield, MA, Chico and Merced, CA, Norwich-New London, CT, and Worcester, MA-CT.
The CoreLogic Market Risk Indicator (MRI) provides a monthly update of the overall health of housing markets across the nation.
It currently predicts the metros of Springfield, Massachusetts, Chico, California, and Merced, California to be at a high risk (50-70% probability) of a home price decline over the next 12 months.
Meanwhile, Norwich-New London, Connecticut and Worcester, Massachusetts are at a moderate risk (25-50% probability) of a price decline during that time.
Ultimately, there isn’t strong evidence of widespread home price declines at the moment, only moderating home price gains in most parts of the country.
Keep an Eye on Housing Supply and Mortgage Quality
If you want to determine when the next housing market crash will take place, it might be wiser to keep an eye on housing supply, along with mortgage quality.
For me, these two things can have the greatest impact on the direction of the housing market.
The supply/demand thing is pretty basic. When you have too much of something, prices generally need to go down.
We’ve had too little of something for a while now, which explains why home prices have surged in the past decade. When that changes, expect home prices to drop.
The other piece is mortgage loan quality. Today’s home loans are pretty darn boring. Just about everyone has a 30-year fixed or 15-year fixed mortgage.
They’ve also got ridiculously low mortgage rates on these super boring loans. And they were underwritten using real income, asset, and employment documentation.
If and when that changes, I’ll start getting nervous. But so far, the credit box remains pretty tight.
Even if it were to loosen, the competitive housing market makes it difficult for the lesser-qualified borrowers to win a bidding war.
This has created a rather pristine batch of mortgages, unlike the ones we saw in 2006, a year or two before the wheels came off.
Purchase mortgage rates this week dropped 11 basis points to 5.70%, according to the latest Freddie MacPMMS Index, ending a two-week climb following the Federal Reserve’s rate hike earlier this month.
A year ago at this time, 30-year fixed rate purchase rates were at 2.98%. The PMMS, a government-sponsored enterprise index, accounts solely for purchase mortgages reported by lenders during the past three days.
“The rapid rise in mortgage rates has finally paused, largely due to the countervailing forces of high inflation and the increasing possibility of an economic recession,” said Sam Khater, chief economist at Freddie Mac.
Another index showed the 30-year conforming rates also slid from last week.
Black Knight’s Optimal Blue OBMMI pricing engine, which includes some refinancing data — but excludes cash-out refis to avoid skewing averages – measured the 30-year conforming rate at 5.89% Wednesday, down slightly from last week’s 5.9%. The 30-year fixed-rate jumbo was at 5.42% Wednesday, up from 5.33% from the previous week, according to the Black Knight index.
Khater expects the dip in mortgage rates will also slow down home price growth.
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“This pause in rate activity should help the housing market rebalance from the bottleneck growth of a seller’s market to a more normal pace of home appreciation,” Khater said.
Mortgage application volume rose 0.7% last week led by refinancing applications and a slight uptick in conventional loans, according to the Mortgage Bankers Association. After increasing 65 basis points during the past three weeks, the 30-year fixed rate declined 14 basis points last week, the MBA said.
Refi application rose 1.9% from the previous week and purchase application marginally increased 0.1% from a week earlier.
Mortgage rates tend to move in concert with the 10-year U.S. Treasury yield, which reached 3.10% Wednesday, down from 3.16% a week before. The federal funds rate doesn’t directly dictate mortgage rates, but it does steer market activity to create higher rates and reduce demand.
Following the Federal Reserve’s interest rate hike of 75 basis points on June 15, mortgage rates have been showing an upward trend for the past two weeks.
According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.83% with an average of 0.9 point, down from last week’s 4.92%. The 15-year fixed-rate mortgage averaged 2.26% a year ago.
The 5-year ARM averaged 4.50% up from 4.41% the previous week. The product averaged 2.54% a year ago.
Economists expect the tightening monetary policy will reduce originations in 2022 and 2023. TheMBA expects loan origination volume to drop about 40% to about $2.4 trillion this year, from last year’s $4 trillion. Meanwhile, the MBA expects 6.53 million existing and new home sales in 2022, compared to 6.9 million in 2021.
Once seen as the death knell for single-family-home neighborhoods in California, a new law meant to create more duplexes has instead done little to encourage construction in some of the largest cities in the state, according to a new report published Wednesday.
Senate Bill 9 was introduced two years ago as a way to help solve California’s severe housing crunch by allowing homeowners to convert their homes into duplexes on a single-family lot or divide the parcel in half to build another duplex for a total of four units. The law went into effect at the start of 2022.
The bill received bipartisan support and ignited fierce debate between its backers, who said SB 9 was a much-needed tool to add housing options for middle-income Californians, and critics, who blasted it as a radical one-size-fits-all policy that undermined local government control.
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Neither argument has so far proved to be true.
Across 13 cities in the state, SB 9 projects are “limited or nonexistent,” according to a new study by the UC Berkeley Terner Center for Housing Innovation.
The report focused on cities considered high-opportunity areas for duplexes because they’ve reported significant increases in the construction of accessory dwelling units — also known as granny flats, casitas or ADUs — in recent years and have available single-family properties for possible divided lots. ADUs are small, free-standing homes most often built in the backyards of existing single-family homes.
The cities are Anaheim, Bakersfield, Berkeley, Burbank, Danville, Long Beach, Los Angeles, Sacramento, San Diego, San Francisco, San Jose, Santa Maria and Saratoga.
By the end of November, the cities had collectively received 282 applications for SB 9 projects, and had approved only 53. Los Angeles accounted for the bulk of applications with 211 submitted and 38 approved, according to the report. San Francisco received 25 applications and had approved four, while San Diego received seven and had approved none.
Three cities received one application, and in Bakersfield, Danville and Santa Maria, zero were submitted.
Applications for dividing lots seem to be even less popular than for building duplexes. Just 100 applications were submitted, the report noted, and 28 had been approved.
David Garcia, Terner Center’s policy director, said SB 9 is only in its first year of implementation and should be given more time before it’s judged as ineffective. But he added that lawmakers should consider whether the law needs tweaking.
“It doesn’t seem like Senate Bill 9 in its first year has resulted in very meaningful amounts of new housing,” Garcia said. “Pretty much everywhere you look, Senate Bill 9 activity is very marginal. It is nonexistent in some places.”
Homeowners right now have an easier time building an ADU than a duplex, thanks to local and state laws that have eased barriers to construction in recent years, Garcia said. It took multiple rounds of legislation to see productive ADU development, and the same will probably be true for SB 9 projects, he said.
Recognizing that more was needed to speed up housing construction in California, the Legislature began overhauling state ADU laws in 2016, and cities followed suit with their own local ordinances to clear red tape in the building process, which has inspired a widespread ADU movement.
Between the start of 2017 and January 2023, the city of Los Angeles reported receiving 35,098 applications for ADUs. It has issued permits for 25,881 and 13,640 have been granted certificates of occupancy.
Heidi Vonblum, San Diego’s planning director, said the law is new and barriers to development are still being worked out. At the same time, the city has an ADU program that “has been very attractive to property owners,” Vonblum said, while updated zoning rules and community plans have eliminated “the need to rely on other programs.”
It’s a similar situation in Sacramento, where homeowners are allowed to build up to two ADUs on their properties, said Kevin Colin, the city’s zoning administrator. Colin’s team handles one to two ADU applications “each working day,” he said, because there’s such high interest in the projects.
To replicate that success, the Terner Center report suggested cutting fees associated with new duplex development, or adding more uniform standards for SB 9 projects to ensure local governments can’t attach subjective criteria that discourage applications, such as architectural design requirements or stringent landscaping rules. It also proposed revising a mandate that homeowners who split their lots must live in one of the units for at least three years, a key concession lawmakers made to reduce opposition from organizations worried about gentrification.
Senate President Pro Tem Toni Atkins (D-San Diego), author of the legislation, said SB 9 was “never intended to be an overnight fix to our housing shortage.”
“We always said not every homeowner would be able, or want, to utilize the tools provided by the bill on Day One,” Atkins said in a statement. “Subdividing a lot, or even just adding an ADU, is a big investment. This bill was never intended to be a sledgehammer approach — it was meant to increase the housing supply over time, and as awareness of the law increases and more homeowners have the ability to embrace the tools, I’m confident that we will see results.”
Garcia and other housing experts said slow progress could also be attributed to the effects of the COVID-19 pandemic, when prices for building materials shot up and homeowners and buyers faced significant market uncertainty. That was followed by high inflation and interest rates.
But other factors could be contributing to sluggish SB 9 interest.
Matthew Lewis, spokesperson for California YIMBY, a housing advocacy organization that supported SB 9, said both ADUs and duplexes have their financial and logistical pros and cons.
ADUs are an ideal way to generate some “passive income” from a renter, Lewis said, and make great homes for aging parents or young adult children. Duplexes are good for that too, but the additional units can be sold separately for even greater economic opportunity.
On the other hand, ADUs are typically a property extension of the main home, so it can be difficult or even impossible to separately sell the extra unit. Duplexes require significantly more financing, and the addition of a separate sewer line and water service.
“The reality is people will follow the path of least resistance to building the house they want,” Lewis said, adding that it could be worth going back to the drawing board to ensure local governments are doing what they can to ease burdens to duplex development.
Although the Terner Center report offers legislators a limited snapshot of how SB 9 has worked so far, the state is also expected to have more robust data available this summer.
Any attempt to modify SB 9 this year, however, is sure to reignite opposition from many of the dozens of cities and neighborhood associations that tried to block its passage in 2021. Since then, some cities have gone to great lengths to avoid implementing the law, including the Silicon Valley suburb of Woodside, which declared itself a mountain lion sanctuary and invited a stern warning for compliance by the state attorney general’s office.
Mortgage-backed securities prepayment speeds increased 22% month-to-month in May, but that was largely due to seasonality related to traditional spring buying activity, a Keefe, Bruyette & Woods report stated.
The conditional prepayment rate across all issuer types was 6.2 in May, versus 5.1 in April. For May 2022, the CPR was 9.9.
“However, prepayments still remain very low, and we expect speeds to remain low for the foreseeable future as purchase activity remains subdued and the majority of the mortgage market is still 300 basis points out of the money to refinance,” Bose George, a KBW analyst, wrote.
The latest Mortgage Bankers Association Weekly Application Survey put the 30-year conforming mortgage at 6.81%, the jumbo at 6.74% and loans insured by the Federal Housing Administration with an average rate of 6.73%. Those rates are keeping many existing homeowners from seeking a new residence as well as from refinancing.
A year ago, the conforming 30-year FRM averaged 5.4% but in 2021, it was 3.15%. “It would take a significant decline in rates (which we do not expect) for transaction volumes to increase meaningfully” for mortgage originators,” George said.
George estimated just 1% of the market is in the money to refi. If rates were to fall 300 basis points, it would make financial sense for 28% of current borrowers to refinance. At a 200 basis point decline that shrinks to 12% and at 100 basis points, just 4% would be in the money.
KBW remains positive on the six mortgage insurers “given that we expect credit to hold up better than current valuations (near/below book value) suggest,” George said. “While we are neutral on most mortgage originators, gain-on-sale margins appear to have bottomed, so we are becoming more constructive.”
The CPR for Fannie Mae bonds in May was 6.3, versus 5.2 in April and 9.8 one year ago. When it comes to Freddie Mac, the CPR last month was 6.1, compared with 5.0 in April and 9.3 for May 2022.
Over the same time frame, the Ginnie Mae CPR of 7.7 was up from 6.4 but down from 14.2.
Real estate has the power to change your life for the better, but it can do so much more than that. Today’s guest, Jen McConnell, used her commissions to fight pediatric cancer, and she later created a foundation to help further the cause. On this podcast, Jen shares how real estate changed her life and has given her the ability to impact the lives of countless others. Jen also covers the advantages of running your own brokerage, ways to deliver five-star customer service, and more.
Listen to today’s show and learn:
Jen McConnell’s start in real estate [1:34]
What agents learn selling homes for builders [5:31]
The Charleston real estate market [6:47]
McConnell Real Estate Partners’ sales and team structure [8:04]
The advantages of running your own brokerage [13:32]
Social media as a tool for real estate agents [15:20]
The financial crisis compared to this correction [17:17]
About The McConnell Foundation and donating to causes that matter [18:33]
Restarting in real estate after major life challenges [22:18]
Advice on starting a non-profit foundation [26:53]
Advice for agents on giving five-star service to get referrals [27:29]
Jen’s favorite CRM: Follow-Up Boss [30:19]
The post-closing checklist: When to follow up with buyers [31:13]
Transitioning from paid leads to referrals [34:42]
Where to find and follow Jen McConnell [36:25]
Jen McConnell
Jen was fortunate enough to start her real estate career when she was a junior in college. Now with over 17 years of experience in the industry, she has a particular expertise in luxury real estate and custom home building. She moved to Charleston in 2006 after receiving her B.A. in Marketing from Ashland University. In 2022 Jen was awarded the South Carolina Women in Business Award, and chosen as a Top 40 Under 40 Real Estate Agent in Charleston. Jen has also been featured on Charleston Home Showcase & Lowcountry Live and has been featured in Charleston Real Producers Magazine, Charleston Style & Design Magazine, Southern Living Magazine, The Post & Courier, Charleston City Paper, Charleston Regional Business Journal, Charleston Daily, Greenville Business Journal, Columbia Business Journal and many others. She is a Certified Luxury Home Marketing Specialist through the Institute for Luxury Home Marketing where she has been awarded the prestigious Million Dollar Guild award. Jen has also earned the coveted Realtor of Distinction Award achieving the highest rank possible as a Platinum Award winner through the Charleston Trident Association of Realtors. The Platinum Award places Jen in the Top 2% of agents in Charleston.
Jen is the Co-Founder of King Tide Investment Group and Blue Ocean Investments, both residential real estate investment companies based in Charleston, SC and Greenville, SC respectively. In 2021 Jen and her husband Josh opened their own brokerage on Isle of Palms and formed McConnell Real Estate Partners where she is the broker-in-charge.
Jen met her husband, Josh, in Charleston and was married at Wild Dunes on Isle of Palms in 2010. They now live on Isle of Palms and welcomed their daughter Bennett in 2016 and their son Bodhi in 2017. They have embraced all Charleston has to offer but most especially the outdoor living, the amazing restaurants and long summer days at the beach. The McConnell’s are avid Clemson Tigers, strong supporters of MUSC Children’s Hospital, the South Carolina Aquarium, Pet Helpers Adoption Center and are members of First United Methodist Church on Isle of Palms.
Jen prides herself on being persistent, utilizing her experience to always find the most advantageous terms for her clients, and providing unparalleled professionalism and expertise for her clients in each and every transaction. Whether you’re looking to buy, sell or invest in real estate throughout the Charleston area, Jen would love to share her passion and market knowledge with you.
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It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email.
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.
Editor’s Note: Since the writing of this article, President Biden signed the debt ceiling bill on June 4, canceling the federal student loan payment pause as of Aug 30, or “60 days after June 30.” Later this month, the Supreme Court will decide whether the Biden-Harris Administration’s Student Debt Relief Program can proceed. Loan payments are expected to resume in October.
Student loans are a significant issue in the United States, where consumers have more than $1.7 trillion in total student loan debt. In 2021, the average federal student loan debt per borrower was just over $37,000. And 20 years after students enter college, half of borrowers still owe $20,000 in student loans.
Broken down by degree levels, the debt increases. Graduate students who receive a degree leave school with an average of nearly $70,000 in debt. Law students are saddled with an average of $180,000; and medical students owe $250,000 on average for total student loan debt.
With so many borrowers and so much debt, it begs the question, “Should all student loan debt be forgiven?”
Who’s in Favor?
By a 2-to-1 margin, voters do support at least some student loans being forgiven, according to a poll from Politico and Morning Consult. And 53% of voters from the same poll support Biden’s extension of student loan payments through August.
Proponents of canceling student loan debt point out that the government is partially responsible for this debt crisis. Because many states slashed higher education funding after the 2008 recession, tuition at both public and private colleges has gone up steeply, and many students have been forced to take out even more in loans.
Unfortunately, the increase in student loan balances hasn’t gone hand in hand with a bump in post-college salary. The result is a national situation where borrowers owe increasingly more in student loans but don’t have the paycheck to aggressively tackle their balances.
Although the government has created income-driven repayment options that seek to keep monthly student loan payments affordable, signing up isn’t without its downsides.
Since these income-driven plans often lengthen loan terms, borrowers may pay significantly more interest on their loans over time. Also, any forgiven balance at the end of their loan term is typically treated as taxable income.
Why Forgiving Student Loan Debt a Isn’t a Slam-Dunk
There are several reasons why forgiving student loan debt may not be a straightforward positive. The first is that, according to U.S. tax laws, debt that’s forgiven is a taxable event. Under income-driven student loan repayment plans, for instance, if you make consistent, on-time payments for the life of the loan (20 or 25 years, depending on when you borrowed), any balance remaining at the end of your loan term is forgiven — but whatever’s forgiven is considered taxable income.
The second issue pundits raise with this plan is that it’s being sold as a stimulus: If the government forgives people’s student loan debt, they’ll put money back into the economy, the thinking goes. But forgiving debt isn’t the same as handing people a check.
And finally, the federal government so far isn’t planning to forgive student loans that borrowers hold with private lenders, which average over $54,000 per borrower.
Alternative Options to Canceling Student Loan Debt
Instead of targeting only student loan borrowers who qualify for relief, the government could provide a stimulus check to all Americans, and Americans could decide for themselves how to use it.
If someone has $10,000 in outstanding student loans, for example, they might prefer to use a check to put a down payment on a house or pay off high-interest credit card debt.
Then there’s the higher education system itself. Canceling or forgiving student loan debt may provide only temporary relief as long as tuition levels continue to rise. As it stands, future generations will be saddled with just as much, if not more, student debt than Americans currently have today.
Tackling Your Student Loan Debt
There’s no telling when or if some form of more long-term relief might appear for student loan borrowers. If you’re struggling under the weight of your student debt, there are strategies that might help:
• Alternative payment plans: Federal student loans come with a variety of repayment options, one of which might suit your situation.
• Direction of overpayments: If you make extra payments on your student loans, you may instruct your servicer to apply them to your principal, rather than the next month’s payment plus interest. This will help pay off your loans faster.
• “Found” money: If you receive a work bonus or tax refund, applying it to your student loans can help reduce your balance faster.
• Refinancing: Refinancing student loans (private and/or federal) into one new loan with a private lender could lower your monthly payment and interest rate, and make it easier to manage payments. Just know that refinancing federal student loans with a private lender means losing access to federal repayment and forgiveness programs.
Recommended: Can Refinanced Student Loans Still Be Forgiven?
The Takeaway
There is no quick fix for student loan debt, which will take further discussion from stakeholders on all sides.
If you are struggling with your own student loan debt, there are options to consider. You can apply for an income-driven repayment plan, apply for student loan deferment or forbearance on your federal student loans, or refinance your loans with a private lender. Keep in mind, though, that refinancing disqualifies you from federal benefits you may otherwise be eligible for.
If you do decide to refinance, consider SoFi. SoFi has a quick online application process, competitive rates, and no origination fees or prepayment penalties.
See if you prequalify with SoFi in just two minutes.
SoFi Student Loan Refinance If you are looking to refinance federal student loans, please be aware that the White House has announced up to $20,000 of student loan forgiveness for Pell Grant recipients and $10,000 for qualifying borrowers whose student loans are federally held. Additionally, the federal student loan payment pause and interest holiday has been extended beyond December 31, 2022. Please carefully consider these changes before refinancing federally held loans with SoFi, since the amount or portion of your federal student debt that you refinance will no longer qualify for the federal loan payment suspension, interest waiver, or any other current or future benefits applicable to federal loans. If you qualify for federal student loan forgiveness and still wish to refinance, leave unrefinanced the amount you expect to be forgiven to receive your federal benefit.
CLICK HERE for more information.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
SoFi Loan Products SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender. Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article. Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances. SOSL0523028
We may primarily focus on airline loyalty programmes and air miles here at TPG but there are a ton of other money-saving loyalty programmes that we also love and help us save money and maximise our travel adventures.
There are dozens of U.K. loyalty schemes out there – of which the Tesco Clubcard and the cross-retailer Nectar card are among the best known.
Both of the above work for travellers who use points and miles, albeit in different ways (their points earned from the loyalty programmes can be converted to Virgin Points and Avios respectively) – but there are other loyalty cards and programmes out there that have similar potential, if sometimes small, benefits for holidaymakers. The key thing to remember is that everything is cumulative, and even the smallest reward can eventually add up.
Here are a handful of loyalty programmes that may be worth signing up for, helping you earn on everyday spending, such as grocery shopping, buying toiletries, or even filling up your car with a tank of petrol.
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Tesco Clubcard
Good for: Collecting Virgin Points, earning points on everyday spending, and getting discounts on select items in your weekly food shop Sign up here: Tesco
Tesco Clubcard is perhaps one of the best-known loyalty schemes in Britain– you can read TPG U.K.’s full guide here.
Though you can no longer transfer Clubcard points into Avios (its partnership with BA ended in early 2021), you can turn £1.50 of Clubcard vouchers into 375 Virgin Points, to boost your Virgin Atlantic Flying Club total. Essentially, you can get 2.5 Virgin points for every one Clubcard point.
So, how do you earn Clubcard points? Once you’ve got the card (or have it attached to your online account), you just do your usual grocery shopping at Tesco, picking up one Clubcard point for every £1 you spend. If you drive, fill up your car with fuel at Tesco and earn one point for every £2 spent. Once you’ve earned a certain amount of points, they’ll be collected into Clubcard vouchers, which you can then transfer into Virgin Points. Simple, really.
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Another benefit for Clubcard holders is that it can help save cash on shopping if they keep an eagle eye out for Clubcard Prices (reductions in prices) and various offers, both in-store and online.
Finally, if you’re keen to rack up even more Clubcard points, there is the Tesco Clubcard Credit Card –a no-fee Mastercard (alas with no signing bonus) that offers points for every transaction over a certain amount. Namely, you’ll get five points per £4 spent at Tesco supermarkets, five points for every £4 spent on fuel at Tesco, plus one point per £8 you spend at other shops and retailers. This is on top of the one point per £1 you’ll get from scanning your card, or shopping online.
Say you spend £100 a week (or £400 a month) at Tesco on your family’s food shopping, that’s 400 points (from your loyalty card) and 500 (from your credit card), totalling 900 Tesco Clubcard points, a £9 voucher or 2,250 Virgin Points per month.
Nectar
Good for: Collecting Avios, earning points on everyday purchases and regular food shopping. Sign up here: Nectar
If you’re an Avios collector, then it’s definitely worth also getting a Nectar account. If you’re yet to sign up, you can read TPG U.K.’s full guide here.
Similar to the Tescon Clubcard you can earn Nectar points on everyday transactions. 400 Nectar points can be transferred into 250 Avios, meaning your everyday shopping can contribute to your points-funded dream trip. Until 16 November you can also transfer Avios back to Nectar points at this same rate (250 Avios to 400 Nectar points), after this date this conversion rate will change so you need to convert 300 Avios to get 400 Nectar points. The Nectar to Avios conversion however will remain (for now) set at 400 Nectar points for 250 Avios.
The easiest ways to collect Nectar are to shop at Sainsbury’s (where many purchases, including fuel, will earn you one Nectar point for every £1 spent), as well as at Sainsbury’s Bank, Esso, Argos, Very, even eBay on eligible items. You can also earn by spending with Booking.com, British Airways, DFDS, Expedia and Nectar Hotels (plus more brands, listed on the Nectar website).
To amplify your Nectar-collecting ability, there’s also the Nectar American Express Credit Card, which has a £0 annual fee in the first year (£25 from year two), offers a bonus of 20,000 Nectar points (when you spend £2,000 in the first three months) and a friend referral bonus of 5,000 Nectar points.
Spending on this card gives you two Nectar points per £1 spent on virtually all purchases, but you’ll earn three points per £1 on purchases at Sainsbury’s, Argos and other Nectar partners — as you can double dip for that third point with your loyalty card. Say you spend £100 a week (or £400 a month) at Sainsbury’s on your family’s shopping, that’s around 4,800 Nectar points or 3,000 Avios earned per month.
Related: The ultimate guide to British Airways Avios
Boots Advantage Card
Good for: Buying travel essentials, earning points on regular purchases Sign up here: Boots
With Boots Advantage Card, you collect four points for every £1 you spend in shops, online or via their app, meaning you’ll be racking up points every time you pick up toiletries, make-up, skincare or even a Boots meal deal.
Every point is worth 1p, meaning 1,000 points is £10 to spend. They quickly add up, and though you can’t use your points to get money off a purchase (only to wipe out the full amount), they may well come in handy for frequent travellers. Whether you travel by plane or train, you might find yourself in an airport or station Boots picking up some forgotten sunscreen, travel minis, flight socks, travel adapters, eye masks, or a disposable camera to document your trip… the list could go on.
A range of offers and discounts will be available to holders, too, potentially saving you a bit of money in the long run… though only if you aren’t tempted by sales prices, and only buy what you actually need.
Heathrow Rewards
Good for: Collecting Virgin Points, Avios or other airline rewards Sign up here: Heathrow
In a nutshell: if you spend a lot of time (and money) at London Heathrow Airport (LHR), then you’d be daft not to consider joining Heathrow Rewards.
Generally speaking, you get one point per £1 spent at the airport, as well as one point for every £10 spent at Travelex exchanging money, with a sign-up bonus of 100 points. You’ll even get extra points when you splash out on expensive items from the airport’s designer shops.
You can transfer your points (at a 1:1 rate) to either Virgin Atlantic Flying Club, into Avios points for use with British Airways, as well as Singapore Airlines KrisFlyer and Emirates Skywards, among others. Check out our guide to Heathrow Rewards for the full list.
Related: The best points and miles promotions running right now
Superdrug Health & Beautycard
Good for: Buying travel essentials, earning points on regular purchases Sign up here: Superdrug
Similarly to Boots’ Advantage Card, Superdrug has its own rewards scheme called the Health & Beautycard, which could be useful for travellers in need of a few essentials such as travel toiletries, skincare products, vitamins, etc.
You’ll earn one point per £1 spent, with 100 points equating to £1 to spend in-store – though crucially you can use your points to pay for part of a purchase if you prefer. You’ll also have the chance to earn extra points as you shop, with periods where quadruple points are on offer, as well as receive various offers and discounts.
BPme Rewards
Good for: Collecting Avios, getting money off travel products such as luggage and tech, and earning points on regular fuel top-ups Sign up here: BPme Rewards
Previously, petrol station BP’s rewards scheme was linked to Nectar, but it now runs its own programme called BPme Rewards.
Essentially, you can earn every time you top up your vehicle, wash your car or by nipping into a BP garage for a snack – snapping up two points for every one litre of Ultimate fuel, one point for every litre of regular fuel, and one point for every £1 spent in a BP shop or car wash.
So, how does this help holidaymakers? Well, you can convert 40 BPme points into 25 Avios (though note you can’t turn Avios into BPme points), with an upper limit of 30,000 BPme points being turned into Avios per day. An alternative might be saving them up for Amazon or Marks & Spencer gift cards, to be used for big travel-related purchases such as new luggage, camping gear, clothing, cameras or other handy tech.
Related: British Airways is launching a new wine club where you can earn up to 15 Avios for every £1 spent
Airtime Rewards
Good for: Saving money on your phone bill, earning cashback on everyday spending (even at stores without their own loyalty schemes). Sign up to the app: Airtime Rewards
Airtime Rewards is a bit of an outlier in this list, as though its app rewards you for shopping at around 150 retailers like a traditional loyalty scheme, the reward comes not in point form but as cashback — which can only be used for the specific, immovable purpose of knocking some money off your monthly phone bill.
All you need to do is check if your phone provider will actually let you get the money off your bill (O2, 3, EE, GiffGaff and Vodafone are signed up) and be willing to download the Airtime Rewards app and submit your debit or credit card details, allowing them to track your spending and automatically apply the discount to your account’s wallet when relevant (but P.S. it won’t work for American Express cards).
Retailers signed up to Airtime Rewards offer varying percentages of cashback on your purchases, which could be anything from 1% to as much as 8%. Popular retailers the app lists include Boots (5% back), Argos (2%), Wilko (3%), New Look (2%), Halfords (4%), Currys (1%) and Waterstones (6%). Foodies can get money back from Wagamama, Zizzi, YO! Sushi and Ocado, while people who utilise public transport can get 8% cashback on LNER Trains.
How much you save depends on how often you shop at retailers like these, but it all adds up – and could knock the odd £5 or £10 off your phone bill, perhaps even monthly, meaning more to save for your next getaway. Or to help with any unexpected roaming charges.
Red by Dufry
Good for: Discounts on duty-free shopping, lounge access and even hotels Sign up for the app here: Red by Dufry
Red by Dufry is the loyalty scheme for duty-free shopping at the airport, earning you points when you buy from Dufry shops – such as WorldDutyFree (which we have in the U.K.), ExpressDutyFree, Nuance (Asia, Europe and North America) and Hudson (U.S. and Canada), though tobacco purchases don’t count. You can use the discount and earn points at airport Michael Kors, Gap, Superdry, and Victoria’s Secret stores, too.
Sign up for the app and you’ll immediately get a Silver card (and QR code), which is scanned at checkout to earn five points per €1 EUR spent and get up to 5% off the price of your purchases. Other potential benefits, such as discounts on airport lounge access, various hotels, restaurants, museums and car rentals, are also worth exploring.
Over time, you can increase your discount. Once you’ve spent €400, you’ll have 2,000 and reach Gold status, giving you up to 7% discount – while spending €1,000 EUR gets you 5,000 points and up to 10% off your shopping with the Platinum card. A big bonus is that if your airport of choice is Heathrow, Dufry has confirmed you can also double dip and earn Heathrow Rewards at the same time as Red points – as well as redeem Heathrow Rewards as WorldDutyFree vouchers.
Related: Virgin Red vs BA Shopping: which one is most worth your time?
Waterstones Plus
Good for: Earning point on book purchases, and getting money off your travel guidebooks and holiday reads Sign up here: Waterstones
As far as rewards go, Waterstones Plus is relatively low stakes, but when it comes to maximising your travel, every pound saved is worth the effort. Particularly if you’re an avid reader, who can’t survive a long-haul plane journey without (at least) one book to delve into, need the latest holiday read for a day at the beach, or prefer exploring a new destination with a trusty guidebook in hand.
Simply, you get one Plus stamp for every £10 you spent in Waterstones shops, on the website or in its cafés. When you have 10 Plus stamps, you’ve got £10 to spend in-store. You might also get some useful offers. There’s an option for students, too, which offers the same stamps-to-cash scenario but adds a bumper 5% discount on most purchases.
Texaco Star Rewards
Good for: Earning points on regular fuel top-ups, and getting money off travel purchases such as luggage and tech Sign up here: Texaco Star Rewards
Another rewards scheme for drivers, petrol station Texaco’s offering – called Star Rewards – has another straightforward premise, with one litre of fuel purchased equaling one point. When you have 500 points, you’ve got £5 to spend, either with Texaco or by converting your points into vouchers that can be used with various retailers – plus you get a 200-point sign-up bonus.
Most notably for travellers, Texaco points can be converted into a Love2Shop voucher, which can pay for or be put towards online purchases at Argos, Currys PC World, John Lewis, Marks & Spencer and Sports Direct – potentially saving you money on travel purchases such as luggage, cameras, or even just some new shoes. You can also use a certain value of voucher towards purchases with the National Trust, boosting any U.K. trips you might take.
Costa Club
Good for: Coffee lovers who want regular freebies while in transit Sign up here: Costa Coffee
If you frequently find yourself drawn to the unmistakable mauve exterior of Costa Coffee when at any British train station or airport, then joining Costa Club – the brand’s loyalty scheme – is a no-brainer.
To be fair, there isn’t loads to think about here. When you buy eight (hot or cold) drinks, you’ll get the ninth free, or if you get your beverage in an environmentally-friendly reusable cup, you’ll only need to buy four to get your next freebie. A bonus is a free piece of cake on your birthday, too.
Costs can quickly add up as you wander the airport or while dipping into train station shops to buy snacks for your rail journey, so you might as well make the most of any savings.
HomeServices of America, Berkshire Hathaway’s real estate brokerage business, has increased its ownership stake in Title Resources Group, an underwriter currently partially owned by Anywhere Real Estate.
Terms of the deal were not disclosed.
Anywhere, a competing real estate franchisor formerly known as Realogy, sold 70% of TRG to Centerbridge Partners in October 2021 for $210 million in cash.
Then in May 2022, HomeServices purchased its first stake in TRG, but the size and price were not disclosed. However, Anywhere reported it made a sale that quarter of a 4% share of its portion of the title company to an unnamed purchaser for a $4 million gain in a Securities and Exchange Commission filing.
More recently, iBuyer Opendoor Technologies took an ownership interest during March in the title insurance underwriter, but again, details were not provided. But in the SEC filing, Anywhere reported a further 1% reduction of its stake for a $1 million gain during the first quarter.
Title Resources Guaranty, TRG’s business unit, finished 2022 as the eighth largest underwriter by market share, with 2.5% of the premiums generated according to American Land Title Association data.
Industry-wide, title insurance premiums generated totaled $21 billion last year. Among the independent underwriters — those not affiliated with Fidelity National, First American, Old Republic and Stewart — TRG only trailed Westcor, which had a 4.4% share.
During 2021, TRG had a 2.4% share of the $26.2 billion of total title insurance premiums written.
“The team and I are thrilled about HomeServices of America’s decision to increase its ownership stake in our company,” Scott McCall, TRG’s president and CEO, said in a press release.” Our expanded relationship with HomeServices of America speaks volumes to the value we create for our customers and our best-in-class solutions.”
Messages were left with TRG and HomeServices to get further specifics about the transaction but not returned by press time.
“Our partnership has already created value for our operations,” Gino Blefari, CEO, HomeServices of America, in the same press release. “We look forward to continuing our collaboration and the positive impact we will have on the industry over the years to come.”