In an effort to cool off the white-hot real estate market in Sweden, the country’s Financial Supervisory Authority (FSA) has been given permission to require homeowners to pay down the principal on their mortgages.
The basic idea here is that the more you have to pay each month on your mortgage, the less you can afford. And if prospective buyers can afford less, home prices must come down. At least, that’s the hope.
Mortgages that feature exotic characteristics such as interest-only periods allow borrowers to purchase more house than they normally would because no principal in due for the first 10 years on a 30-year mortgage.
Instead, the entire payment goes toward interest, which makes the loan more affordable but doesn’t actually require the homeowner to pay down their mortgage.
Unfortunately, this means the only way a homeowner can gain equity is via home price appreciation, which is particularly dangerous if home prices are already inflated and at risk of falling.
That scenario actually played out here in the United States during the recent housing bubble, though it was even worse because of the prevalence of option arms, those that allow negative amortization.
Both interest-only loans and negative amortization loans have been all but banned thanks to the Qualified Mortgage rule that doesn’t allow such features.
Most loans now meet the QM rule meaning only specialized non-QM lenders offer things like IO. I’ve yet to see any banks offering negative amortization again.
70% of Swedes Have Interest-Only Loans
In Sweden, roughly 70% of homeowners have interest-only mortgages, meaning disaster is imminent if the real estate market follows the fateful path ours did just a few years back.
The new rule wouldn’t go into effect until next May, and would exempt mortgages to purchase newly built homes.
Apparently most banks and lenders in Sweden already require borrowers to pay some portion of principal each month, but this rule would make it mandatory.
The Swedish FSA recommends that home buyers pay at least two percent of the principal balance each year until the loan-to-value ratio falls to 70%.
After that, they believe homeowners should pay at least one percent of the principal balance until the LTV drops to 50%.
Here in the United States, interest-only is mainly a thing of the past but 30-year fixed mortgages continue to be the loan of choice for most home buyers, especially first-timers.
If you actually look at an amortization schedule, you’ll see that not much principal is paid early on in the loan term. It’s mainly interest.
For example, a $200,000 30-year fixed set at 4% would only pay down about $3,500 in principal in year one, or less than 1.8% of the total balance.
That fails to meet the recommendation of the Swedish FSA. Also consider that homeowners in the U.S. put very little down, sometimes just 3% or 3.5%, making the loans very risky if property values take a dive again.
I certainly believe homeowners should have a choice as to whether they want to pay down their loans or invest elsewhere, but they absolutely must be qualified to do so.
Consider a 15-year fixed instead. That same $200,000 loan amount set at 3.25% (lower because it’s a 15-year mortgage) would pay off more than five percent of the principal balance in year one.
Of course, many borrowers can’t afford the payments on a 15-year fixed, which is why the 30-year remains so popular. It may also be one of the reasons home prices are so high…
Average mortgage rates tumbled yesterday following a first-class inflation report. In some cases, they are now back below 7% for an excellent borrower wanting a conventional, 30-year, fixed-rate mortgage. Phew!
First thing, markets were signaling that mortgage rates today might fall but perhaps only a little. However, these early mini-trends often switch speed or direction later in the day.
Current mortgage and refinance rates
Program
Mortgage Rate
APR*
Change
Conventional 30-year fixed
7.122%
7.147%
+0.15
Conventional 15-year fixed
6.297%
6.321%
+0.1
Conventional 20-year fixed
7.34%
7.403%
+0.03
Conventional 10-year fixed
6.872%
6.985%
+0.05
30-year fixed FHA
7.065%
7.685%
+0.02
15-year fixed FHA
6.503%
6.972%
+0.16
30-year fixed VA
6.75%
6.959%
+0.25
15-year fixed VA
6.625%
6.965%
Unchanged
5/1 ARM Conventional
6.75%
7.266%
Unchanged
5/1 ARM FHA
6.75%
7.532%
+0.11
5/1 ARM VA
6.75%
7.532%
+0.11
Rates are provided by our partner network, and may not reflect the market. Your rate might be different. Click here for a personalized rate quote. See our rate assumptions See our rate assumptions here.
Should you lock a mortgage rate today?
The chances of mortgage rates falling far and for long later this year improved yesterday. That day’s inflation report helped a lot.
But I reckon we’ll probably need a heap more similarly rate-friendly data in order to bring about that significant and sustained fall. And, while it’s possible such a heap will be delivered quickly, it’s probably more likely we’ll see any improvements late this year or sometime in 2024.
So, my personal rate lock recommendations remain:
LOCK if closing in 7 days
LOCK if closing in 15 days
LOCK if closing in 30 days
LOCK if closing in 45 days
LOCK if closing in 60days
However, with so much uncertainty at the moment, your instincts could easily turn out to be as good as mine — or better. So let your gut and your own tolerance for risk help guide you.
>Related: 7 Tips to get the best refinance rate
Market data affecting today’s mortgage rates
Here’s a snapshot of the state of play this morning at about 9:50 a.m. (ET). The data, compared with roughly the same time yesterday, were:
The yield on 10-year Treasury notes tumbled to 3.81% from 3.91%. (Very good for mortgage rates.) More than any other market, mortgage rates typically tend to follow these particular Treasury bond yields
Major stock indexes were higher. (Bad for mortgage rates.) When investors buy shares, they’re often selling bonds, which pushes those prices down and increases yields and mortgage rates. The opposite may happen when indexes are lower. But this is an imperfect relationship
Oil prices decreased to $75.65 from $75.94 a barrel. (Neutral for mortgage rates*.) Energy prices play a prominent role in creating inflation and also point to future economic activity
Goldprices rose to $1,964 from $1,959 an ounce. (Neutral for mortgage rates*.) It is generally better for rates when gold prices rise and worse when they fall. Gold tends to rise when investors worry about the economy.
CNN Business Fear & Greed index — held steady at 81 out of 100. (Neutral for mortgage rates.) “Greedy” investors push bond prices down (and interest rates up) as they leave the bond market and move into stocks, while “fearful” investors do the opposite. So lower readings are often better than higher ones
*A movement of less than $20 on gold prices or 40 cents on oil ones is a change of 1% or less. So we only count meaningful differences as good or bad for mortgage rates.
Caveats about markets and rates
Before the pandemic and the Federal Reserve’s interventions in the mortgage market, you could look at the above figures and make a pretty good guess about what would happen to mortgage rates that day. But that’s no longer the case. We still make daily calls. And are usually right. But our record for accuracy won’t achieve its former high levels until things settle down.
So, use markets only as a rough guide. Because they have to be exceptionally strong or weak to rely on them. But, with that caveat, mortgage rates today might fall. However, be aware that “intraday swings” (when rates change speed or direction during the day) are a common feature right now.
Important notes on today’s mortgage rates
Here are some things you need to know:
Typically, mortgage rates go up when the economy’s doing well and down when it’s in trouble. But there are exceptions. Read ‘How mortgage rates are determined and why you should care’
Only “top-tier” borrowers (with stellar credit scores, big down payments, and very healthy finances) get the ultralow mortgage rates you’ll see advertised
Lenders vary. Yours may or may not follow the crowd when it comes to daily rate movements — though they all usually follow the broader trend over time
When daily rate changes are small, some lenders will adjust closing costs and leave their rate cards the same
Refinance rates are typically close to those for purchases.
A lot is going on at the moment. And nobody can claim to know with certainty what will happen to mortgage rates in the coming hours, days, weeks or months.
What’s driving mortgage rates today?
Yesterday
Yesterday’s consumer price index (CPI) was a real tonic for mortgage rates. Comerica Bank’s chief economist said that “the fever is breaking“ for inflation.
And The Wall Street Journal (paywall) suggested: “Inflation cooled last month to its slowest pace in more than two years, giving Americans relief from a painful period of rising prices and boosting the chances that the Federal Reserve will stop raising interest rates after an expected increase this month.“
Note that the Journal’s writers (and many others) still expect a rise in general interest rates on Jul. 26. And that might limit how far mortgage rates can fall in the short term.
But other things could also limit the extent and duration of further decreases in mortgage rates. More and more people are talking up the possibility of a “soft landing.“ That refers to the Fed successfully driving down inflation without throwing the country into a recession.
But those of us wanting lower mortgage rates were kind of hoping for a recession. Of course, we didn’t want the bad stuff for the wider population. But mortgage rates tend to fall when the economy is in trouble and rise when it’s doing well.
So, while some falls in mortgage rates might be on the cards later in the year or in 2024, they might not be as big as we’d once been able to hope.
The rest of this week
This morning’s producer price index (PPI) for June was nothing like as important to mortgage rates as yesterday’s CPI. It and tomorrow’s import price index (IPI) are generally seen as secondary inflation measures. But, with markets hyper-sensitive to inflation news right now, they’re worth observing.
Today’s PPI was probably good for mortgage rates. The headline figure (PPI for final demand) came in at 0.1% in June, compared with the expected 0.2%. Just don’t expect it to have as positive an effect as yesterday’s news.
Please read the weekend edition of this daily report for more background on what’s happening to mortgage rates.
Recent trends
According to Freddie Mac’s archives, the weekly all-time low for mortgage rates was set on Jan. 7, 2021, when it stood at 2.65% for conventional, 30-year, fixed-rate mortgages.
Freddie’s Jul. 6 report put that same weekly average at 6.81%, up from the previous week’s 6.71%. But Freddie is almost always out of date by the time it announces its weekly figures.
In November, Freddie stopped including discount points in its forecasts. It has also delayed until later in the day the time at which it publishes its Thursday reports. Andwe now update this section on Fridays.
Expert forecasts for mortgage rates
Looking further ahead, Fannie Mae and the Mortgage Bankers Association (MBA) each has a team of economists dedicated to monitoring and forecasting what will happen to the economy, the housing sector and mortgage rates.
And here are their rate forecasts for the current quarter (Q2/23) and the following three quarters (Q3/23, Q4/23 and Q1/24).
The numbers in the table below are for 30-year, fixed-rate mortgages. They were both updated in June.
In the past, we included Freddie Mac’s forecasts. But it seems to have given up on publishing those.
Forecaster
Q2/23
Q3/23
Q4/23
Q1/24
Fannie Mae
6.5%
6.6%
6.3%
6.1%
MBA
6.5%
6.2%
5.8%
5.6%
Of course, given so many unknowables, the whole current crop of forecasts might be even more speculative than usual. And their past record for accuracy hasn’t been wildly impressive.
Find your lowest mortgage rate today
You should comparison shop widely, no matter what sort of mortgage you want. Federal regulator the Consumer Financial Protection Bureau found in May 2023:
“Mortgage borrowers are paying around $100 a month more depending on which lender they choose, for the same type of loan and the same consumer characteristics (such as credit score and down payment).”
In other words, over the lifetime of a 30-year loan, homebuyers who don’t bother to get quotes from multiple lenders risk losing an average of $36,000. What could you do with that sort of money?
Mortgage rate methodology
The Mortgage Reports receives rates based on selected criteria from multiple lending partners each day. We arrive at an average rate and APR for each loan type to display in our chart. Because we average an array of rates, it gives you a better idea of what you might find in the marketplace. Furthermore, we average rates for the same loan types. For example, FHA fixed with FHA fixed. The end result is a good snapshot of daily rates and how they change over time.
How your mortgage interest rate is determined
Mortgage and refinance rates vary a lot depending on each borrower’s unique situation.
Factors that determine your mortgage interest rate include:
Overall strength of the economy — A strong economy usually means higher rates, while a weaker one can push current mortgage rates down to promote borrowing
Lender capacity — When a lender is very busy, it will increase rates to deter new business and give its loan officers some breathing room
Property type (condo, single-family, town house, etc.) — A primary residence, meaning a home you plan to live in full time, will have a lower interest rate. Investment properties, second homes, and vacation homes have higher mortgage rates
Loan-to-value ratio (determined by your down payment) — Your loan-to-value ratio (LTV) compares your loan amount to the value of the home. A lower LTV, meaning a bigger down payment, gets you a lower mortgage rate
Debt-To-Income ratio — This number compares your total monthly debts to your pretax income. The more debt you currently have, the less room you’ll have in your budget for a mortgage payment
Loan term — Loans with a shorter term (like a 15-year mortgage) typically have lower rates than a 30-year loan term
Borrower’s credit score — Typically the higher your credit score is, the lower your mortgage rate, and vice versa
Mortgage discount points — Borrowers have the option to buy discount points or ‘mortgage points’ at closing. These let you pay money upfront to lower your interest rate
Remember, every mortgage lender weighs these factors a little differently.
To find the best rate for your situation, you’ll want to get personalized estimates from a few different lenders.
Are refinance rates the same as mortgage rates?
Rates for a home purchase and mortgage refinance are often similar.
However, some lenders will charge more for a refinance under certain circumstances.
Typically when rates fall, homeowners rush to refinance. They see an opportunity to lock in a lower rate and payment for the rest of their loan.
This creates a tidal wave of new work for mortgage lenders.
Unfortunately, some lenders don’t have the capacity or crew to process a large number of refinance loan applications.
In this case, a lender might raise its rates to deter new business and give loan officers time to process loans currently in the pipeline.
Also, cashing out equity can result in a higher rate when refinancing.
Cash-out refinances pose a greater risk for mortgage lenders, so they’re often priced higher than new home purchases and rate-term refinances.
How to get the lowest mortgage or refinance rate
Since rates can vary, always shop around when buying a house or refinancing a mortgage.
Comparison shopping can potentially save thousands, even tens of thousands of dollars over the life of your loan.
Here are a few tips to keep in mind:
1. Get multiple quotes
Many borrowers make the mistake of accepting the first mortgage or refinance offer they receive.
Some simply go with the bank they use for checking and savings since that can seem easiest.
However, your bank might not offer the best mortgage deal for you. And if you’re refinancing, your financial situation may have changed enough that your current lender is no longer your best bet.
So get multiple quotes from at least three different lenders to find the right one for you.
2. Compare Loan Estimates
When shopping for a mortgage or refinance, lenders will provide a Loan Estimate that breaks down important costs associated with the loan.
You’ll want to read these Loan Estimates carefully and compare costs and fees line-by-line, including:
Interest rate
Annual percentage rate (APR)
Monthly mortgage payment
Loan origination fees
Rate lock fees
Closing costs
Remember, the lowest interest rate isn’t always the best deal.
Annual percentage rate (APR) can help you compare the ‘real’ cost of two loans. It estimates your total yearly cost including interest and fees.
Also pay close attention to your closing costs.
Some lenders may bring their rates down by charging more upfront via discount points. These can add thousands to your out-of-pocket costs.
3. Negotiate your mortgage rate
You can also negotiate your mortgage rate to get a better deal.
Let’s say you get loan estimates from two lenders. Lender A offers the better rate, but you prefer your loan terms from Lender B. Talk to Lender B and see if they can beat the former’s pricing.
You might be surprised to find that a lender is willing to give you a lower interest rate in order to keep your business.
And if they’re not, keep shopping — there’s a good chance someone will.
Fixed-rate mortgage vs. adjustable-rate mortgage: Which is right for you?
Mortgage borrowers can choose between a fixed-rate mortgage and an adjustable-rate mortgage (ARM).
Fixed-rate mortgages (FRMs) have interest rates that never change, unless you decide to refinance. This results in predictable monthly payments and stability over the life of your loan.
Adjustable-rate loans have a low interest rate that’s fixed for a set number of years (typically five or seven). After the initial fixed-rate period, the interest rate adjusts every year based on market conditions.
With each rate adjustment, a borrower’s mortgage rate can either increase, decrease, or stay the same. These loans are unpredictable since monthly payments can change each year.
Adjustable-rate mortgages are fitting for borrowers who expect to move before their first rate adjustment, or who can afford a higher future payment.
In most other cases, a fixed-rate mortgage is typically the safer and better choice.
Remember, if rates drop sharply, you are free to refinance and lock in a lower rate and payment later on.
How your credit score affects your mortgage rate
You don’t need a high credit score to qualify for a home purchase or refinance, but your credit score will affect your rate.
This is because credit history determines risk level.
Historically speaking, borrowers with higher credit scores are less likely to default on their mortgages, so they qualify for lower rates.
For the best rate, aim for a credit score of 720 or higher.
Mortgage programs that don’t require a high score include:
Conventional home loans — minimum 620 credit score
FHA loans — minimum 500 credit score (with a 10% down payment) or 580 (with a 3.5% down payment)
VA loans — no minimum credit score, but 620 is common
USDA loans — minimum 640 credit score
Ideally, you want to check your credit report and score at least 6 months before applying for a mortgage. This gives you time to sort out any errors and make sure your score is as high as possible.
If you’re ready to apply now, it’s still worth checking so you have a good idea of what loan programs you might qualify for and how your score will affect your rate.
You can get your credit report from AnnualCreditReport.com and your score from MyFico.com.
How big of a down payment do I need?
Nowadays, mortgage programs don’t require the conventional 20 percent down.
In fact, first-time home buyers put only 6 percent down on average.
Down payment minimums vary depending on the loan program. For example:
Conventional home loans require a down payment between 3% and 5%
FHA loans require 3.5% down
VA and USDA loans allow zero down payment
Jumbo loans typically require at least 5% to 10% down
Keep in mind, a higher down payment reduces your risk as a borrower and helps you negotiate a better mortgage rate.
If you are able to make a 20 percent down payment, you can avoid paying for mortgage insurance.
This is an added cost paid by the borrower, which protects their lender in case of default or foreclosure.
But a big down payment is not required.
For many people, it makes sense to make a smaller down payment in order to buy a house sooner and start building home equity.
Choosing the right type of home loan
No two mortgage loans are alike, so it’s important to know your options and choose the right type of mortgage.
The five main types of mortgages include:
Fixed-rate mortgage (FRM)
Your interest rate remains the same over the life of the loan. This is a good option for borrowers who expect to live in their homes long-term.
The most popular loan option is the 30-year mortgage, but 15- and 20-year terms are also commonly available.
Adjustable-rate mortgage (ARM)
Adjustable-rate loans have a fixed interest rate for the first few years. Then, your mortgage rate resets every year.
Your rate and payment can rise or fall annually depending on how the broader interest rate trends.
ARMs are ideal for borrowers who expect to move prior to their first rate adjustment (usually in 5 or 7 years).
For those who plan to stay in their home long-term, a fixed-rate mortgage is typically recommended.
Jumbo mortgage
A jumbo loan is a mortgage that exceeds the conforming loan limit set by Fannie Mae and Freddie Mac.
In 2023, the conforming loan limit is $726,200 in most areas.
Jumbo loans are perfect for borrowers who need a larger loan to purchase a high-priced property, especially in big cities with high real estate values.
FHA mortgage
A government loan backed by the Federal Housing Administration for low- to moderate-income borrowers. FHA loans feature low credit score and down payment requirements.
VA mortgage
A government loan backed by the Department of Veterans Affairs. To be eligible, you must be active-duty military, a veteran, a Reservist or National Guard service member, or an eligible spouse.
VA loans allow no down payment and have exceptionally low mortgage rates.
USDA mortgage
USDA loans are a government program backed by the U.S. Department of Agriculture. They offer a no-down-payment solution for borrowers who purchase real estate in an eligible rural area. To qualify, your income must be at or below the local median.
Bank statement loan
Borrowers can qualify for a mortgage without tax returns, using their personal or business bank account. This is an option for self-employed or seasonally-employed borrowers.
Portfolio/Non-QM loan
These are mortgages that lenders don’t sell on the secondary mortgage market. This gives lenders the flexibility to set their own guidelines.
Non-QM loans may have lower credit score requirements, or offer low-down-payment options without mortgage insurance.
Choosing the right mortgage lender
The lender or loan program that’s right for one person might not be right for another.
Explore your options and then pick a loan based on your credit score, down payment, and financial goals, as well as local home prices.
Whether you’re getting a mortgage for a home purchase or a refinance, always shop around and compare rates and terms.
Typically, it only takes a few hours to get quotes from multiple lenders — and it could save you thousands in the long run.
Current mortgage rates methodology
We receive current mortgage rates each day from a network of mortgage lenders that offer home purchase and refinance loans. Mortgage rates shown here are based on sample borrower profiles that vary by loan type. See our full loan assumptions here.
New Year’s resolutions don’t have to be reserved for diets and exercise. Sometimes the area of your life that really needs attention is your finances. As 2022 ends and 2023 begins, this is your opportunity to reset and reevaluate.
The new year is the perfect time to give your finances a boost. Here are my top 15 financial New Year’s resolutions that can help improve your financial health.
I’m jumping in with the big ones first…
What’s Ahead:
1. Start investing
While it may not be the easiest resolution on this list, investing is one of the best ways to build your wealth. If you don’t think that you have time to start investing, I get it. Investing can take time to understand. We’ve done our best to lay out the different investing methods in our article: How To Invest: Essential Advice To Help You Start Investing.
While it’s totally possible to invest without the help of an advisor, many of us are choosing the advisor route because, let’s be honest, it’s just so much easier. Remember that advisors also includerobo-advisors, which can help you decide what to invest in including when to buy and sell.
Read more: The Best Robo-Advisors
2. Build your emergency fund
When emergencies happen, you don’t want to be stuck without anemergency fund. Emergency funds can be lifesavers when unexpected challenges make their way into your life, like losing your job or getting into an accident, or a global pandemic.
So, if your emergency fund is non-existent at the start of the new year, it is time to change that!
To start, decide how much money you need in your emergency fund by calculating your monthly expenses. This should include not only your rent or mortgage but also your utilities and your basic expenses. Many financial experts agree that this should be at least three to six months’ worth of expenses, but it can’t hurt to overestimate how much money you would need in times of emergency.
If you need help calculating how much money you should save in your emergency fund, check out MU30’s handyemergency fund calculator to help you find your perfect number.
My husband and I like to keep our emergency fund in ahigh-yield savings account. These accounts allow us to access our savings quickly. Even better, high-yield savings accounts accrue interest at a higher rate than a traditional savings account, letting our money grow while it lies in wait.
Read more: Best High Yield Savings Accounts Compared
3. Pay off your credit card debt
If credit card debt is bogging down your financial success, why not make it a goal to tackle it in the new year?
Paying off your credit card debt is an important step in becoming financially healthy. If you don’t pay it off, you are doing a serious disservice to your credit score.
When searching for ways to pay off your debt, I recommend opening abalance transfer credit card. While it may sound counterproductive on one hand, these cards can help you consolidate your debt and even stop it from collecting interest for some time. That’s a big incentive right there!
Read more: How To Pay Off Credit Card Debt Fast – The Smart Way
4. Start a budget and track your expenses
If you don’t already have one, you need a budget. Creating and sticking to one could be the single best thing that you do for your finances in the new year. Budgets force you to take a hard look at the money that you bring in, the money that you shell out, and the money that you may owe.
If you have never followed a budget before, the thought of starting one can be daunting. The truth is, budgets can be incredibly freeing. Once you get used to following your budget, you can begin finding ways to free up cash to put towards your future.
Read more: How To Make A Budget: Our Step-By-Step Guide To Managing Your Money
5. Pay off your student loans
Student loan debt is one of the nation’s largest consumer debts and if you have it, you know just how painful it can be. Wouldn’t it be nice if you could get rid of your student loan debt altogether? Well, depending on how much you have, 2023 could be the year that you make it possible!
Making a plan to pay off your student loans is all aboutgetting organized. Knowing who you owe, how much you owe, and how you will afford to pay off your loans should be your first priority.
If you are having trouble trying to fit your student loan payment into your budget, it’s worth it to give your lender a call. Often, you can work outincome-driven repayment plans or deferments that can lessen the financial blow of your current loan payments.
Read more: Income-Based Repayment: Should You Do It?
6. Open a retirement account or fine-tune your existing one
When you are young,saving for your retirement probably sounds like the least exciting thing that you can do with your money. The truth is, the sooner that you start, the more secure you will be when your retirement comes. Investing in your retirement means that you are investing in your future.
If you’re employed, a quick conversation with your boss or human resources department can help you find out if your employer offers retirement accounts like 401(k)s or 403(b)s. Often, employers who have them will match a percentage of your annual contributions. This match is like an extra bonus from your employer that you don’t collect until retirement.
If your employer does not offer retirement accounts or you’re self-employed, you still have options for saving for your retirement.IRAs, or Individual Retirement Accounts can be opened by anyone.
Read more: The Beginner’s Guide To Saving For Retirement
7. Build your credit
If you are going into 2023 without any credit, it’s time to start building some. The credit system was put in place as a way to give future lenders and creditors information about potential borrowers. This allows them to make an informed decision and weigh the risks of loaning money to you.
If you haven’t built your credit, you could find yourself regretting it when you want to finance a car or even buy a house. Most lenders will not give out loans to people with poor credit and if you’re lucky enough to find one that does, your interest rates are often through the roof!
Taking out a loan with acosigner or becoming anauthorized user on your parent’s credit card can help you get started. Personally, I began building my credit with asecured credit card. When you get a secured credit card, you’ll need to put down a deposit, which then becomes your line of credit.
The OpenSky® Secured Visa® Credit Card is unique among secured cards in that they won’t run your credit when you apply, giving even those with no credit the ability to qualify.
Read more: Best Secured Credit Cards
8. Create a will
Don’t be fooled into thinking that having a will is just for old people. If you don’t have a will already, making it one of your New Year’s resolutions could benefit you and your family. Without one, in the event of your death, yourstate’s laws will determine who takes ownership of your assets and property.
If you’re wondering if you really need a will, the answer is probably a resounding yes. Most importantly,wills are strongly recommended for those who have children, have a spouse, or have a positive net worth. Having a will protects your family and your assets, something that all of us can agree is important.
If you don’t have a will, don’t put it off!
Read more: Do I Need A Will? Who Needs A Will (And When)
9. Spend less money
Everyone wants to save money, right? One of the best ways to do that is toconsciously spend less of it. While it is easier said than done, spending less money in 2023 is doable with a few tweaks to your spending habits.
To begin spending less money, I recommend this: take a hard look at your budget and try to find spending categories that you can cut back on. Lessening, or even getting rid of, spending categories allocated towards things like coffee runs and eating out could save you a significant amount of money each month.
Here are a couple more of my favorite ways to save:
Find a better deal on cell phone service. Cell phone services can be expensive. If you haven’t shopped around lately, give it a try. Many cell phone service companies will work hard to beat their competitors and will often beat your current rate!
Learn how to clip coupons. Clipping coupons is an easy way to save money at the grocery store and beyond. Often found in local circulars and newspapers, using coupons can add up to some significant savings.
Make a grocery list. Grocery lists can keep you on track financially in the midst of temptation, saving you from overspending on snacks and unneeded ingredients.
Make coffee at home. Coffee runs add up quickly, but it would be hard to get through the workweek without it. Instead of running to the coffee shop, try making coffee at home and bringing it to work in an insulated thermos.
Bring lunch to work. If you areeating out for lunch every day, your finances are more than likely feeling the pressure. Why not try giving them a break and pack last night’s leftovers instead?
Have date nights at home. Date nights can be an important part of staying connected with your partner and you shouldn’t have to sacrifice them. Finding alternative date night ideas, like cooking dinner together at home, can help you rack in the savings.
Try a meal delivery service.Meal delivery services will deliver pre-portioned ingredients and easy-to-follow recipes straight to your door. Home Chef is just one option, offering meals that take as little as five minutes to prepare. Plus, whether you’re looking to cut back on meat, carbs, calories, or more, Home Chef has options for you.
Cut back on subscriptions – We live in a world overrun by subscription services. It can be easy to sign up for a bunch and then never use half of them.
10. Save money on insurance
Protecting the ones you love is always a priority. In 2023, why not make it a goal to do so, while also keeping more of your hard-earned money in your bank account? I’ve found that one of the best ways to do this is by saving money on insurance.
11. Define your long-term financial goals
Sometimes you get so caught up in your present financial situation that you forget to plan for the future. Setting long-termfinancial goals is an exciting way to keep yourself on track and to ensure that your money is working for you.
Long-term financial goals vary depending on the person and the state of their finances. These goals could include saving for retirement, a downpayment on your future home, or even saving for that trip that you have always wanted to take. After you have defined your financial goals, it is time to start planning for how and when you will reach them.
I like to organize my long-term financial goals into my monthly and yearly household budget. This allows me and my husband to aggressively work towards our goals.
12. Track your expenses
Implementing this habit in my household was easy. My husband and I decided to ask for receipts with every purchase, ensuring that we don’t miss any expenses. After making a purchase and returning home, we began recording the totals on our receipts into monthly spending categories. These include areas of spending like groceries, entertainment, and gas.
Knowing how much we spend each month allows us to not only make a more accurate budget but also plan for the future. Keeping track of your expenses gives you a reference to look back at when creating a budget, including utility bills that may change due to the seasons.
If you have a mortgage, chances are that you would like to get rid of it. Well,making extra principal mortgage payments in 2023 could help you be free from it faster!
Those who can afford to put extra money towards their mortgage, but don’t, are missing out on some major savings. If you pay your mortgage for the life of your original loan, you could end up paying nearly as much in interest as you do for your home itself.
For example:
A $150,000, 30-year mortgage with an interest rate of 4.5% will cost a total of $273,610 by the end of thirty years. This means that $123,610 of your payments have been made towards interest.
If you take the same mortgage, but pay an extra $100 monthly, you would save $29,723.18 and shorten your loan by six years and four months.
If you want to make paying down your mortgage a priority in 2023, simpleloan pay-off calculators can help you figure out how much extra money you would like to put towards your mortgage.
You could also consider refinancing your mortgage, which can provide you with a much better interest rate, which, in turn, can lower the total cost of your loan.
14. Save money with money-making and reward apps
What if I told you that you are throwing money out the window every time that you shop online? If you are shopping without a cash back app, this is most definitely true for you! And since most of us have resolved to online shopping, this extra money could be adding up quickly!
To remedy this, I like to use a cash back app. Not only do cash back apps help you save money, but they can help you make money, too!
If you are looking to save, or make, money, Swagbucks may be a great choice for you. In fact, it is the internet’s leading rewards site! For users who are hoping to save money, I recommend installing Swagbucks browser extension, the “SwagButton.”
15. Get your taxes done early
Tax season is coming and there is no need to stress about it. Getting yourtaxes done early in 2023 can help put your mind at ease and save you from taking an extra trip out of the house. You may even find yourself with your return in hand faster than if you wait until closer to the deadline!
Filing taxes can be complicated. Luckily, there are great tax preparation companies that can help make filing a breeze and answer many of your tax questions – you can find a list of our favorites here.
Summary
The end of 2021 is fast approaching and it’s time to start thinking about the resolutions that you’ll make for 2023. While many of us – myself included – typically resolve to follow a healthier lifestyle, we sometimes forget to think about our financial health.
As 2021 comes to a close, start thinking about what you can do to make your finances stronger, because we never know when a financially challenging year will hit again.
Mortgage applications decreased 3.9% for the week ending Aug. 13 compared to the week prior and fewer borrowers opted to refinance, according to the latest report from the Mortgage Bankers Association.
Ten-year Treasury yields rose overall but tapered off slightly at the end of last week, and 30-year mortgage rates tracked by the MBA reached 3.06%. That deterred some borrowers from refinancing and contributed to an overall slowdown in mortgage applications.
“Mortgage rates were at their highest levels in around a month, with the 30-year fixed rate increasing above 3% to 3.06%. Mortgage rates followed an overall increase in Treasury yields last week, which started higher from the strong July jobs report before slowing because of weaker consumer sentiment and concerns about rising COVID-19 cases,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“The increase in mortgage rates caused a 5% decrease in refinancing, driven by a 7% drop in conventional refinance applications. Even though rates are 7 basis points lower than the same week a year ago, the refinance index is around 8% lower,” said Kan. “The eligible pool of homeowners who stand to benefit from a refinance is smaller now.”
The refinance share of mortgage activity decreased to 67.3% of total applications from 68.0% the previous week.
How mid-year market shifts are impacting originators
The greater need for cash-out refinances drives originators to prepare with diverse product offerings. Additionally, originators will now need to have a way to qualify self-employed borrowers who may need to rely on bank statements to qualify for a mortgage.
Presented by: FGMC
The share of applications for conventional purchase loans decreased from the week prior, while Federal Housing Administration and Veterans’ Affairs loans, typically popular with first-time homebuyers, gained a larger share.
FHA applications rose to 9.4% from 8.9% the week prior, while the VA share of total applications increased to 10.3% from 9.6% the week prior. The share of applications for United States Department of Agriculture loans decreased to 0.4% from 0.5% the week prior. The adjustable-rate mortgage share of activity stood unchanged for the week at 3.2% of total applications.
And although average loan sizes continued to decrease, they still remain at historic highs. The average loan size for purchases was $339,200, while for refinances the average size was $393,700.
“Despite a second-straight weekly decrease, average loan sizes remain close to record highs,” Kan said. “This is a continuing sign that sales prices are still elevated, driven by stiff competition leading to accelerating home-price growth.”
Here is a more detailed breakdown of this week’s mortgage applications data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.06% from 2.9%.
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.19% from 3.15%.
The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.15% from 3.06%.
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.41% from 2.35%.
The average contract interest rate for 5/1 ARMs increased to 2.90% from 2.52%.
Mortgage applications fell 1.7% in the week ending July 30, according to the latest report from the Mortgage Bankers Association. That’s despite the 30-year fixed rate falling to its lowest level in roughly six months.
It’s an about-face from the prior week, in which applications increased 5.7% on the strength of descending mortgage rates.
Mike Fratantoni, MBA’s senior vice president and chief economist, said this past week’s drop in mortgage applications can be attributed to the market’s assessment of the latest COVID-19 delta variant.
“Thirty-year mortgage rates dropped below 3% in our survey for the first time since February, presenting an opportunity for many homeowners who have not yet refinanced to lower their rate and payments,” he said. “Refinance application volume slightly decreased following an 11% jump last week, and purchase application volume decreased again, reflecting the ongoing lack of inventory that continues to drive rapid home-price appreciation across the country.”
The refinance share of activity of total mortgage applications increased slightly to 67.6% from 67.5% the previous week. On an unadjusted basis, the market composite index decreased 2% compared with the previous week (when it increased 6%). The seasonally adjusted purchase index decreased as well, down 2% from the previous week.
How mid-year market shifts are impacting originators
The greater need for cash-out refinances drives originators to prepare with diverse product offerings. Additionally, originators will now need to have a way to qualify self-employed borrowers who may need to rely on bank statements to qualify for a mortgage.
Presented by: FGMC
The FHA share of total mortgage applications remained unchanged at 9%, and the VA share of total mortgage applications increased to 9.9% from 9.8%.
Here is a more detailed breakdown of this week’s mortgage applications data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 2.97% from 3.01% — the first time since February that 30-year rates sank below 3%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.12% from 3.11%
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.08% from 3.03%
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.33%, the lowest level in the history of the survey, from 2.36%
The average contract interest rate for 5/1 ARMs increased to 2.93% from 2.81%, with points decreasing to 0.20 (including the origination fee) from 0.23 for 80% LTV loans
One of the largest nonbank mortgage lenders in the country is loanDepot, typically landing on the top-10 list overall year after year.
In fact, they’ve even cracked the top five in some years as well, so they’re certainly a big time player in the mortgage world.
At one time, they were even the subject of speculation that they’d be acquired by mega retailer Amazon in its effort to enter the mortgage business.
And in early 2021, they became the Official Mortgage Provider of Major League Baseball (MLB). So expect to see their name and brand around a lot more this year.
Let’s get some history on loanDepot and determine if they’re a good fit for your home loan needs.
Table of Contents
– loanDepot Fast Facts – How to Apply at loanDepot – mello smartloan technology – What Loan Types Do They Offer? – loanDepot Lifetime Guarantee – loanDepot Mortgage Rates – loanDepot Reviews – loanDepot Pros and Cons – loanDepot vs. Rocket Mortgage
loanDepot Launched in 2010
Direct mortgage lender that offers home purchase and refinance loans
Founded in 2010, headquartered in Foothill Ranch, CA
Offers industry’s first end-to-end digital mortgage
Ranked 2nd largest nonbank lender and a top-10 retail mortgage lender
Also the 8th largest VA lender in the country
Over 200 retail branches nationwide and growing
Went public in early 2021 under ticker symbol NYSE:LDI
Despite being a very young company, Foothill Ranch, CA-based direct lender loanDepot has funded more than $300 billion in consumer loans since 2010.
In 2021 alone they funded over $137 billion in home loans, which speaks to their massive growth.
They are led by industry veteran Anthony Hsieh, their CEO and chairman who previously worked at LoansDirect.com, E*TRADE Mortgage, and LendingTree.
The company refers to themselves as the nation’s fifth largest retail mortgage originator, and second largest nonbank consumer lender in the country (Quicken Loans is first).
They employ some 6,400 team members, including 2,000+ licensed loan officers, across 200+ branch locations nationwide.
In 2015, loanDepot began offering personal loans as well, which do not rely on collateral such as real estate.
In recent years, they’ve also launched several joint ventures with home builders and real estate brokerages to expand their purchase loan business.
Their latest is LGI Mortgage Solutions, a partnership with LGI Homes, Inc. that will serve customers in Arizona, Colorado, and Florida.
A prior one is named Farm Bureau Mortgage, a JV with Farm Bureau Bank that will serve homeowners in America’s Heartland.
They also recently launched Henlopen Mortgage, a partnership with Schell Brothers, a premier home builder.
Previously, they created BRP Home Mortgage, a collaboration between loanDepot and Brookfield Residential Properties Inc.
Lastly, loanDepot partnered with iBuyer OfferPad to create OfferPad Home Loans in late 2017.
In November 2020, they announced plans to go public after lots of speculation, and in early 2021 were trading under the NYSE ticker symbol LDI.
At last glance, the mortgage lender had a valuation of about $2 billion.
How to Apply for a Mortgage at loanDepot
You can apply online via a digital mortgage process from their website in minutes
Those who prefer a face-to-face meeting can visit one of their many retail branches
Or you can call them directly and deal with someone over the phone
They also have a wholesale lending division that works with brokers
In terms of applying for a loan, you can visit one of their 150+ branches nationwide, or call a representative at a branch near you. Some folks may still prefer a face-to-face sit down.
Their website features a search by branch or by loan officer if you’re looking for some place or someone specific, similar to the process over at New American Funding.
You can also start the process online at their website by hitting the “apply now” button. It will ask you if you’re currently working with anybody at loanDepot to ensure you are connected to the right person.
They also have a major wholesale division available in 46 states and the District of Columbia, meaning it’s possible to get a mortgage from loanDepot via a mortgage broker as well.
loanDepot Is Big on Technology
Company employs their proprietary mello smartloan technology
Uses data verification to digitally connect income, employment, and asset information
Fully digital experience from application through closing
Can shave 17 days off loan process and get you to clear-to-close in 8 days
In early 2019, loanDepot released its mello smartloan technology, which it bills as “the smarter way to mortgage.”
Instead of having to gather lots of financial paperwork and upload it to the lender’s website, mello allows you to digitally connect income, employment, and asset information.
This makes it both fast and secure— and once connected, their proprietary loan engines will determine the best loan options available, similar to the tech over at Rocket Mortgage.
You can also lean on their “expert loan consultants” if you need assistance in making a choice.
While the digital mortgage and data verification isn’t entirely novel or unique to loanDepot, they say mello smartloan is the “first-of-its-kind end-to-end digital home loan.”
That’s because it’s a fully digital experience from application through closing, not just part of the way.
For example, it comes with mello smartdecision, which instantly determines if you can qualify for an appraisal waiver, just minutes after submitting your online application.
Altogether, they believe mello smartloan can shave up to 17 days off the closing process and get you cleared to close in as little as eight days. That’s pretty fast.
Adjustable-rate mortgages: 3/1, 5/1, 7/1 and 10/1 ARMs
Jumbo loans: Borrow up to $2 million
Government loans: FHA and VA loans
Home equity loans: up to 90% of home value
Like most large mortgage lenders, they offer home refinance loans, home purchase loans, and home equity loans.
That includes both rate and term refinances and cash out refinances, the latter useful if you want to tap equity and get a new interest rate on your mortgage.
They offer both conventional and government loans, including FHA loans and VA loans, but notably absent are USDA home loans.
Additionally, you can get a home equity loan or a renovation loan (FHA 203k loan).
And as noted, they also offer personal loans, which are funded by Cross River Bank, an FDIC-insured New Jersey commercial bank.
With regard to loan type, they offer all the usual stuff like fixed-rate mortgages and ARMs, in common varieties.
loanDepot Lifetime Guarantee
Only pay lender fees the first time you get a mortgage with loanDepot
They waive the fees when you refinance your original home loan
And reimburse the home appraisal fee as well
Must apply directly with loanDepot to qualify
If you get home loan financing from loanDepot once, you won’t have to pay lender fees if you use them again, for life.
With the loanDepot Lifetime Guarantee, they waive lender fees and reimburse your home appraisal fee when you refinance your existing loan with loanDepot in the future.
They say the average homeowner will refinance their mortgage every seven years, which they break down as four times over the span of a 30-year mortgage, and twice over a 15-year mortgage.
The guarantee doesn’t apply to loans obtained to purchase a new property, home equity loans, renovation loans, bond loan programs, down payment assistance programs, or personal loans.
Additionally, the guarantee only works if you submit your application directly to loanDepot (no wholesale or third-party applying such as through LendingTree).
Finally, for guarantees issued on/after January 1st, 2019, you must wait 12 calendar months from the date issued.
loanDepot Mortgage Rates
Unfortunately, loanDepot does not openly advertise their mortgage rates like some other mortgage lenders.
This makes it very difficult to know where they stand price-wise relative to other mortgage companies.
Additionally, they don’t mention any of their lender fees on their website, further complicating the whole shopping around process.
However, mortgage rate quotes are available by phone or online if you fill out an application.
Once you get a quote, you may want to compare it to other mortgage companies. This may be the only way to comparison shop because their rates/fees aren’t openly advertised.
Be sure to consider other banks, nonbanks, credit unions, and independent mortgage brokers.
100% of Loan Servicing Is Now In-House
In late February 2023, loanDepot said it migrated 100% of the mortgage loans serviced by its third-party sub-servicer to its in-house platform.
The move move is part of loanDepot’s Vision 2025 strategy that aims to eliminate mortgage sub-servicing costs and reduce third-party vendor spending.
This allows the company to improve its brand affinity and tap into its existing client base more easily.
For example, they can market products and services (such as a refinance opportunity) to their existing customers more easily.
Perhaps more importantly, it gives them full control of the “entire customer journey” to ensure they can provide a consistent experience from start to finish and beyond.
At last glance, they have loan aervicing centers in Chicago, Illinois and Neward, New Jersey.
loanDepot Reviews
On Zillow, the company has a very impressive 4.88-star rating out of 5 from more than 4,700 customer reviews, which says a lot about their consistency.
Many of the recent reviews indicated that the interest rate was lower than expected, a good sign if you’re looking for a low-cost mortgage.
Over at LendingTree, they have a slightly lower 4.3-star rating out of 5 from about 4,500 reviews, which while not as strong as the Zillow rating, is still considered great.
Additionally, the company is recommended by 86% of those who reviewed them on LendingTree.
loanDepot has a less impressive 3.6-star rating on Trustpilot from over 3,000 customer reviews, some of which you want to read to get a better idea about customer service.
The good news is they have an ‘A+’ rating on the Better Business Bureau website, and are an accredited company. So they should handle any customer complaints professionally.
loanDepot Pros and Cons
The Good
Tons of digital technology to make loan closings fast
Waives lender fees on subsequent refinance transactions
Has retail branches if you prefer to meet in person
Licensed in all 50 states and DC
‘A+’ rating with the Better Business Bureau
Mostly positive customer reviews
The Potential Bad
Don’t let you view mortgage rates without calling them or filling out a form
Don’t offer USDA loans
Doesn’t publish lender fees (unclear if high or low)
High closing costs seem to be a common complaint among reviews
loanDepot vs. Rocket Mortgage
loanDepot
Rocket Mortgage
Digital application
Yes
Yes
Branch locations
Yes
No
Loan types offered
Conventional, FHA, VA, jumbo
Conventional, FHA, VA, jumbo
Minimum FICO score
580
580
Will service your loan?
Yes
Yes
Loyalty program
Yes
Yes
Licensed to do business in…
All 50 states and D.C.
All 50 states and D.C.
BBB rating
A+
A+
Zillow rating
4.88/5 from 4,700 reviews
4.48/5 from 7900 reviews
loanDepot ranks #7th nationally in terms of overall home loan volume, while Rocket Mortgage is #1 in the country.
Last year, loanDepot funded just over $100 billion and Rocket originated a whopping $314 billion.
So while both are very large mortgage companies, Rocket does about triple the business.
However, loanDepot CEO Anthony Hsieh is intent on catching up and taking the top spot eventually.
One distinction between the two is that loanDepot has 200 branch locations, while Rocket simply operates a massive mortgage call center.
This means you can apply in-person with loanDepot, but not with Rocket.
Other than that, they both offer the latest digital mortgage technology, and the same loan programs.
But loanDepot offers a Lifetime Guarantee in which you won’t pay lender fees again if you refinance with them in the future. Rocket doesn’t have a loyalty program.
Lastly, both are accredited with the Better Business Bureau (BBB) and have A+ ratings. loanDepot edges Rocket with a higher Zillow rating though.
Purchase loans continue to claim a larger share of the origination pipeline as refinance opportunities dwindle, according to Black Knight’s originations market monitor report.
In June, purchase locks made up 88.4% of the month’s market mix, a record high. Purchase lock counts were down 31% year over year and 29% compared to pre-pandemic levels in 2019. In other words, nearly nine out of every 10 mortgages originated is a purchase loan.
Rate lock activity fell 1% month over month in May, with conforming loans gaining share mainly at the expense of non-conforming loan products. The benchmark 30-year mortgage finished the month 6 basis points (bps) higher at 6.78%.
Purchase lock volumes are down 11% from the end of March and 31% below the volume of the same month in 2022 and cashout refinances fell 16% over the past three months and are 63% below the same month last year. Meanwhile, rate/term refinances decreased 32% over the three-month period and 44% from the same month in 2022. Refi share of lock volume dipped to 11.6%, a new low for this cycle.
“Purchase loans continue to claim a larger share of a shrinking origination pipeline, as refinance opportunities remain scarce. Indeed, we saw the purchase lending share of June’s locks hit another all-time high. But keep in mind: it is a dominant share of a very constrained market,”Andy Walden, vice president of enterprise research at Black Knight, said in a statement.
The average purchase price rose for the seventh consecutive month, to $457,000 with an average loan amount remaining flat at $360,000. Demand for ARM loans dipped slightly to 7.38% of total locks. Jumbo rates increased disproportionately to conforming, resulting in nonconforming locks (including jumbo and expanded guidelines) claiming a smaller share of the pipeline.
Of course, some markets were more purchase-heavy than others. The lowest percentage of refi locks were in the Houston and Minneapolis metros, at just 6%,. By contrast, 20% of locks in the Los Angeles metro were refis in April. Atlanta (15%), Miami (15%), Riverside-San Bernardino (14%), San Francisco-Oakland (14%) also had a higher rate of refis than the national average.
“As May gave way to June, we saw banks lose some of their appetite for jumbo loans. While the OMBBI 30-year conforming index rose 6 basis points over the month, the jumbo rate index was up by three times that level,” said Walden.
Credit scores for conforming, FHA and VA borrowers improved slightly in the month, suggesting a tightening of credit standards in an uncertain economy.
At the same time, the level of economic uncertainty in the market resulted in historically wide spreads between 10-year Treasury yields and 30-year mortgage rates, and that uncertainty appears to be trickling down to tightening credit standards across the board.
Black Knight researchers found that the purchase pull-through rate was 77.7% in April, up 94 basis points from March. The refinance pull-through rate, however, fell to 61.9%, a 402 bps drop from March.
The Black Knight Mortgage Monitor for May doesn’t even hint at a housing crisis on the horizon. Affordability is again (or maybe still) a concern, but buyers are out there, and home prices reflect that fact. Homeowners are performing well on their mortgages (and aren’t about to give up their low rates), and while the current report doesn’t touch on the subject, continue to build on their equity. In addition, builders are getting back in the game, shoring up hope of a lessening in the perennial shortage of available homes.
Home prices, which eased late last year have now risen for five straight months, completely reversing the earlier declines. Black Knight says its Home Price Index hit an all-time high, rising 0.7 percent from April to May. While the year-over-year growth rate is currently hovering at 0.1 percent, the May increase is equivalent to annualized growth of 8.9 percent. If the recent pattern continues, that annual growth rate may turn and begin trending higher as early as next month.
Twenty-seven of the 50 largest U.S. markets have returned to their previous price peaks or set new ones this spring. Even the West Coast, where some of the largest downward corrections happened last year, saw many of its markets reheat in May. San Jose was up 1.4 percent, Los Angeles rose 1.0 percent, and Seattle gained 0.9 percent. Austin, Texas is a major exception to the price hikes. The deficit from its peak continues to grow, reaching -13.8 percent in May.
“There is no doubt that the housing market has reignited from a home price perspective,” according to Black Knight Vice President Andy Walden. “Firming prices have now fully erased the pullback we tracked through the last half of 2022 and lifted the seasonally adjusted Black Knight HPI to a new record high in May.
This, of course, means that affordability is taking a hit, fueled by rising interest rates as well as home prices. As of June 22, with 30-year rates at 6.67 percent, it required $2,258 per month in principal and interest to make the monthly payment on a median-priced home, given 20 percent down on a 30-year mortgage. This exceeds the previous high of $2,234 required last October. Nationally, it takes 35.7 percent of median household income to make the average P&I payment. Only rising income since the fall of 2022 has kept May from being the most unaffordable month in the past 37 years.
Inventories continue to be the principal driver of home prices. For-sale listings have deteriorated in 95 percent of major markets this year and are at about half of pre-pandemic levels. Meanwhile, more than 60 percent of existing mortgage holders – and potential sellers – are sitting on first lien rates below 4 percent, with significant disincentive to list in this high-priced, low inventory, high-rate environment.
Still, prepayments (SMM or single-month mortality) rose by 23 percent in May to 0.54 percent, the highest level since September. Twenty-eight percent of prepayments were related to home sales, but all drivers rose by double digits. There were 22 business days in the month, two more than in April, which also accounted for a 10 percent increase in the SMM. Prepayments are still down 40 percent year-over-year.
Walden commented, “As it stands, housing affordability remains dangerously close to the 37-year lows reached late last year, despite the Federal Reserve’s attempts to cool the market. The challenge for the Fed now is to chart a path forward toward a ‘soft landing’ without reheating the housing market and reigniting inflation. But the same lever used to reduce demand – raising rates – has not only made housing unaffordable almost universally across major markets, but it has also resulted in significant supply shortages by discouraging potential sellers unwilling to list in such an environment, further strengthening prices. At this point, even if rates come down, but not so sharply as to entice potential sellers out of their sub-3.5 percent mortgages, it could risk a widespread reheating of home prices across the U.S.”
Walden sees welcome news in May’s residential construction data. “New construction starts and completions were both strong in May. However, most projects underway in the month were 5+ multi-family units, as opposed to single-family residential (SFR) units. SFRs made up just 40 percent of the total and is now at construction levels still approximately 30 percent below the 2005 peak.”
There is also good news on the mortgage delinquency front. The national delinquency rate fell 11 basis points (bps) in May to 3.10 percent, returning to a near-record low after a calendar-driven spike in April. The number of borrowers missing a single payment dropped by 94,000 or 9.5 percent erasing nearly half of the prior month’s increase. Loans 90 or more days past due, are down 30 percent year-over-year and within 1 percent of the post-Great Recession low in 2019.
Late last year, Zillow said home prices needed to come down about 25% to become affordable again.
Around that same time, mortgage rates hit their highest point in 20 years, with the 30-year fixed surging above 7%.
That led many to draw the conclusion that relief was in sight, at least if you were a prospective home buyer.
And indeed, home prices did fall shortly after, coming down 3.3% in March, per Redfin, the largest year-over-year decline since 2012.
But that was then, and this is now. In May, home prices hit a new all-time record high. What on Earth is going on?
After a Brief Pause, Home Prices Are Reaccelerating
The pandemic-fueled housing market is the stuff of legends. Just look at this chart from the FHFA, which oversees Fannie Mae and Freddie Mac.
Home prices had already surpassed the prior housing bubble peak before COVID-19 reared its ugly head.
But just look how much higher they climbed from 2020 onward. This explosive growth worried the Fed, which was also dealing with out-of-control inflation.
And led to Federal Reserve Chairman Jerome Powell calling for a housing market “reset,” which he believed could be accomplished via countless interest rate increases.
As noted, it did indeed lead to a massive spike in mortgage rates, with the 30-year fixed more than doubling from the low-3% range to over 7% by late 2022.
Eventually, that did dampen home prices, with some reporting it as the second largest home price correction of the post-WWII era.
Problem is, it was short-lived, and if you consider how much home prices went up prior to the correction, it was a drop in the bucket.
Yes, some areas of the country have fared worse than others, but most markets nationwide have proven to be quite resilient.
This has a lot of housing bears, renters, prospective buyers, and economists in general scratching their heads, wondering why home prices aren’t dropping.
There’s Still No Housing Supply Out There
One of the major themes in the housing market since prices bottomed in 2012 has been a lack of supply.
And it really hasn’t changed much since then. In fact, by some measures housing inventory has worsened.
For example, Redfin reported last week that months of supply was a mere 2.6 months, close to its lowest level in a year.
Similarly, Black Knight noted that for-sale inventory has improved “modestly,” but remains 51% off pre-pandemic levels.
Generally, four to five months is considered a balanced market, with less supply tipped in favor of sellers as opposed to buyers.
As to why, there’s been a shortage of homes for sale since the 2010s, generally due to underbuilding. Further exacerbating that shortage has been the so-called mortgage rate lock-in effect.
Simply put, most homeowners have 30-year fixed-rate mortgages set at 2-3% (or even sub-2%), effectively locking them into their homes.
This is either because they can’t leave (due to a lack of affordability) or because they choose not to (they don’t want to buy a replacement home with a 7% mortgage).
Taken together, there are simply not enough homes on the market, despite decreased demand from buyers.
Yes, demand is also down, as the Fed expected it to be, due to much higher mortgage rates. And still-high home prices.
But because supply is also so low, with active listings down 12% year-over-year, low demand isn’t enough to push down home prices.
That’s an important thing to highlight because the housing market isn’t particularly hot. It’s just a lack of supply that’s keeping things together.
But Affordability Has Never Been Worse!
Those rightfully critical of sky-high home prices have pointed to historically bad affordability.
Lofty asking prices and much higher mortgage rates require a $2,258 monthly principal and interest payment on a median-priced home with 20% down and a 30-year mortgage set at 6.67%.
This is the highest payment on record, per Black Knight, and up markedly from levels seen just a few years prior.
In Los Angeles, 68% of median income is required to buy the average home, which is clearly too much.
Black Knight pointed out that we’d need a 30% drop in home prices to get back to “normal affordability.”
The alternative is 19% income growth if home prices remain flat and mortgage rates fall to 5%.
In the meantime, home prices are simply too high from an affordability standpoint, which explains weak demand.
But because supply remains constrained, home prices defied expectations and chalked an impressive 0.7% month-over-month gain in May.
That could put annual appreciation close to 9% again, which would be seemingly ridiculous given the high mortgage rates currently on offer.
However, we need to remember that home prices and mortgage rates aren’t negatively correlated. Both can rise or fall together.
For example, the economy could fall into a recession, pushing mortgage rates down while also driving property values lower.
Or the reverse could happen. A robust economy, similar to the one we’re in now, could push interest rates up and home prices along with it.
In other words, you need a catalyst to tank home prices, such as massive unemployment, which has yet to materialize.
Some Housing Markets Faring Worse Than Others
While national home prices appear to have resumed their upward trajectory, after a very brief pause, not all housing markets are performing the same.
The worst at the moment is once-hot Austin, Texas, where prices are off a sizable 13.8% from their peak.
Interestingly, “inventory there continues to run above pre-pandemic levels,” which might kind of sum up the situation nationally.
In places where inventory hasn’t declined (or worse, risen), home prices are under pressure, which is logical given affordability issues.
But per Black Knight, so far this year active listings have fallen in 95% of major metros and remain 50% lower than pre-pandemic levels.
So other markets that were struggling, such as Seattle and San Francisco, have bounced back as their inventory has swung from oversupply back to undersupply.
This might explain why home prices aren’t dropping, even with 7% mortgage rates.
Keep an eye on inventory, and less on mortgage rates, to determine where home prices go next.
Our experts answer readers’ home-buying questions and write unbiased product reviews (here’s how we assess mortgages). In some cases, we receive a commission from our partners; however, our opinions are our own.
After falling moderately in June, mortgage rates have been climbing this month. Average 30-year mortgage rates hit 6.81% this week, the highest they’ve been in eight months, according to Freddie Mac.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “This upward trend is being driven by a resilient economy, persistent inflation, and a more hawkish tone from the Federal Reserve. These high rates combined with low inventory continue to price many potential homebuyers out of the market.”
The Federal Reserve has been raising the federal funds rate to get inflation under control. Though the central bank opted not to raise rates at its June meeting, Fed officials have indicated that future hikes are likely, as the economy is still running hot. This has helped keep mortgage rates elevated.
Markets largely expect a 25-basis-point hike at the Fed’s next meeting later this month, according to the CME FedWatch Tool.
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Mortgage Calculator
Use our free mortgage calculator to see how today’s mortgage rates will affect your monthly and long-term payments.
Mortgage Calculator
$1,161 Your estimated monthly payment
Total paid$418,177
Principal paid$275,520
Interest paid$42,657
Paying a 25% higher down payment would save you $8,916.08 on interest charges
Lowering the interest rate by 1% would save you $51,562.03
Paying an additional $500 each month would reduce the loan length by 146 months
By plugging in different term lengths and interest rates, you’ll see how your monthly payment could change.
30-Year Fixed Mortgage Rates
The average 30-year fixed mortgage rate is currently 6.81%, according to Freddie Mac. This is a 10-basis-point increase from the week before.
The 30-year fixed-rate mortgage is the most common type of home loan. With this type of mortgage, you’ll pay back what you borrowed over 30 years, and your interest rate won’t change for the life of the loan.
The lengthy 30-year term allows you to spread out your payments over a long period of time, meaning you can keep your monthly payments lower and more manageable. The trade-off is that you’ll have a higher rate than you would with shorter terms or adjustable rates.
15-Year Fixed Mortgage Rates
The average 15-year fixed mortgage rate is 6.24% right now, according to Freddie Mac data. This is an 18-basis-point increase from the previous week.
If you want the predictability that comes with a fixed rate but are looking to spend less on interest over the life of your loan, a 15-year fixed-rate mortgage might be a good fit for you. Because these terms are shorter and have lower rates than 30-year fixed-rate mortgages, you could potentially save tens of thousands of dollars in interest. However, you’ll have a higher monthly payment than you would with a longer term.
Are Mortgage Rates Going Up?
Mortgage rates started ticking up from historic lows in the second half of 2021 and increased significantly in 2022. But mortgage rates are expected to trend down this year.
In the last 12 months, the Consumer Price Index rose by 4%. Inflation remains elevated, but has started to slow, which is a good sign for mortgage rates and the broader economy.
For homeowners looking to leverage their home’s value to cover a big purchase — such as a home renovation — a home equity line of credit (HELOC) may be a good option while we wait for mortgage rates to ease. Check out some of our best HELOC lenders to start your search for the right loan for you.
A HELOC is a line of credit that lets you borrow against the equity in your home. It works similarly to a credit card in that you borrow what you need rather than getting the full amount you’re borrowing in a lump sum. It also lets you tap into the money you have in your home without replacing your entire mortgage, like you’d do with a cash-out refinance.
Current HELOC rates are relatively low compared to other loan options, including credit cards and personal loans.
How Do Fed Rate Hikes Affect Mortgages?
The Fed has been increasing the federal funds rate to try to slow economic growth and get inflation under control.
Mortgage rates aren’t directly impacted by changes to the federal funds rate, but they often trend up or down ahead of Fed policy moves. This is because mortgage rates change based on investor demand for mortgage-backed securities, and this demand is often impacted by how investors expect Fed hikes to affect the broader economy.
As inflation starts to come down, mortgage rates should, too. But the Fed has indicated that it’s watching for sustained signs of slowing inflation, and it’s not going to lower rates again any time soon — it may even increase rates again in its July meeting.