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Today’s 30-year fixed mortgage rate is 7.77% while a 15-year fixed-rate mortgage is 6.98%. Rates on 30-year jumbo mortgages are 7.73%.
*Data accurate as of April 30, 2024, the latest data available.
30-year fixed mortgage rates
According to data from Curinos, mortgage rates for a 30-year fixed-rate loan sit at 7.77%. This means they’ve risen from 7.65% last week. Last month, rates were at 7.37%, putting today’s rates significantly higher and up from 5.95% last year.
The 30-year fixed-rate average today is 1.36 percentage points below the 52-week high of 9.13% and 2.14 percentage points higher than the 52-week low of 5.63%.
At the current 30-year fixed rate, you’ll pay about $716 each month for every $100,000 you borrow — up from around $708 last week.
Ready to buy? Compare the best mortgage lenders.
15-year fixed mortgage rates
The mortgage rates for 15-year fixed loans inched up today to 6.98% from 6.88% last week. Today’s rate is up from last month’s 6.54% and up from a year ago when it was 5.35%.
At the current 15-year fixed rate, you’ll pay about $896 each month for every $100,000 you borrow, up from about $893 last week.
30-year jumbo mortgage rates
The mortgage rates for 30-year jumbo loans rose today to 7.73% from 7.43% last week. This is up from last month’s 7.31% and up from 5.79% last year.
At the current 30-year jumbo rate, you’ll pay around $713 each month for every $100,000 you borrow, up from about $709 last week.
Methodology
To determine average mortgage rates, Curinos uses a standardized set of parameters. For conventional mortgages, the calculations are based on an owner-occupied, one-unit property with a loan amount of $350,000. For jumbo mortgages, the loan amount is $766,550. These calculations assume an 80% loan-to-value ratio, a credit score of 740 or higher and a 60-day lock period.
Frequently asked questions (FAQs)
If you opt for a rate lock, you can typically do so for 30 to 60 days, depending on the lender. In some cases, you might be able to lock in your rate for up to 120 days.
Keep in mind that while some lenders allow you to lock in a mortgage rate for free, you’ll likely have to pay a fee for a longer lock period. This fee generally ranges from 0.25% to 0.5% of your loan amount. You could also be charged a fee if you want to extend the lock period — usually 0.375% of the loan amount.
If you’re not planning on keeping a home for a long time, an ARM could be the better option — especially if fixed-rate loans have much higher rates at the time. This is because ARMs tend to have lower rates to start than fixed-rate mortgages, though your rate can increase over time.
While a fixed-rate loan will have the same rate throughout the entire term, an ARM will start with a fixed rate for a set amount of time and then switch to a variable rate that can change for the remainder of your loan term. For example, a 5/1 ARM will have a fixed rate for five years (the “5” in 5/1), then switch to a variable rate that can change once a year (the “1” in 5/1).
Mortgage rates are determined by a variety of factors, including the overall economy, inflation and the actions of the Federal Reserve. Mortgage lenders then set their loan rates based on these economic elements.
The rate you’re offered on a mortgage will also depend not only on the lender but also on your credit score, income, debt-to-income (DTI) ratio and other parts of your financial profile.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.
Megan Horner is editorial director at USA TODAY Blueprint. She has over 10 years of experience in online publishing, mostly focused on credit cards and banking. Previously, she was the head of publishing at Finder.com where she led the team to publish personal finance content on credit cards, banking, loans, mortgages and more. Prior to that, she was an editor at Credit Karma. Megan has been featured in CreditCards.com, American Banker, Lifehacker and news broadcasts across the country. She has a bachelor’s degree in English and editing.
Ashley Harrison is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, she likes to draw, play video games, and hang out with her black cats, Salem and Binx.
Inside: Learn what 27 an hour is how much a year, month, and day. Plus tips to budget your money. Don’t miss the ways to increase your income.
You’re probably wondering if I made $27 a year, how much do I truly make? What will that add up to over the course of the year when working? Is $27 an hour good?
Is this wage something that I can actually live on? Or do I need to find ways that I can increase my hourly wage? How much more is $27.50 an hour annually?
When you finally start earning $27 an hour, you are happy with your progress as an hourly employee. Typically, this is when many hourly employees start to become salaried workers.
In this post, we’re going to detail exactly what $27 an hour is how much a year. Also, we are going to break it down to know how much is made per month, bi-weekly, per week, and daily.
That will help you immensely with how you spend your money. Because too many times the hard-earned cash is brought home, but there is no actual plan for how to spend that money.
By taking a step ahead and making a plan for the money, you are better able to decide how you want to live, make sure that you put your money goals first, and not just living paycheck to paycheck struggling to survive.
The ultimate goal with money success is to be wise with how you spend your money.
If that is something you want too, then keep reading. You are in the right place.
$27 an Hour is How Much a Year?
When we ran all of our numbers to figure out how much is $27 per hour is as an annual salary, we used the average working day of 40 hours a week.
40 hours x 52 weeks x $27 = $56,160
$56,160 is the gross annual salary with a $27 per hour wage.
As of June 2023, the average hourly wage is $33.58 (source).
Breakdown Of 27 Dollars An Hour Is How Much A Year
Typically, the average workweek is 40 hours and you can work 52 weeks a year. Take 40 hours times 52 weeks and that equals 2,080 working hours. Then, multiply the hourly salary of $27 times 2,080 working hours, and the result is $56,160.
That number is the gross income before taxes, insurance, 401K, or anything else is taken out. Net income is how much you deposit into your bank account.
That is just above the $56000 salary threshold, which is desired for a recent college graduate.
Work Part Time?
But you may think, oh wait, I’m only working part-time. So if you’re working part-time, the assumption is working 20 hours a week at $27 an hour.
Only 20 hours per week. Then, take 20 hours times 52 weeks and that equals 1,040 working hours. Then, multiply the hourly salary of $27 times 1,040 working hours and the result is $28,080.
How Much is $27 Per Month?
On average, the monthly amount would average $4,680.
Annual Amount of $56,160 ÷ 12 months = $4,680 per month
Since some months have more days and fewer days like February, you can expect months with more days to have a bigger paycheck. Also, this can be heavily influenced by how often you are paid and on which days you get paid.
Plus by increasing your wage from $25 an hour, you average an extra $347 per month. So, yes a few more dollars an hour add up!
Work Part Time?
Only 20 hours per week. Then, the monthly amount would average $2,340.
How Much is $27 per Hour Per Week
This is a great number to know! How much do I make each week? When I roll out of bed and do my job, what can I expect to make at the end of the week?
Once again, the assumption is 40 hours worked.
40 hours x $27 = $1,080 per week.
Work Part Time?
Only 20 hours per week. Then, the weekly amount would be $540.
How Much is $27 per Hour Bi-Weekly
For this calculation, take the average weekly pay of $1,080 and double it.
$1,080 per week x 2 = $2,160
Also, the other way to calculate this is:
40 hours x 2 weeks x $27 an hour = $2,160
Work Part Time?
Only 20 hours per week. Then, the bi-weekly amount would be $1,080.
How Much is $27 Per Hour Per Day
This depends on how many hours you work in a day. For this example, we are going to use an eight-hour workday.
8 hours x $27 per hour = $216 per day.
If you work 10 hours a day for four days, then you would make $270 per day. (10 hours x $27 per hour)
Work Part Time?
Only 4 hours per day. Then, the daily amount would be $108.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
$27 Per Hour is…
$27 per Hour – Full Time
Total Income
Yearly Salary (52 weeks)
$56,160
Yearly Wage (50 weeks)
$55,000
Monthly Salary (173 hours)
$4,680
Weekly Wage (40 Hours)
$1,080
Bi-Weekly Wage (80 Hours)
$2,160
Daily Wage (8 Hours)
$216
Net Estimated Monthly Income
$3,573
**These are assumptions based on simple scenarios.
Paid Time Off Earning 27 Dollars an Hour
Does your employer offer paid time off?
As an hourly employee, you may or may not get paid time off.
So, here are the scenarios for both cases.
For general purposes, we are going to assume you work 40 hours per week over the course of the year.
Case # 1 – With Paid Time Off
Most hourly employees get two weeks of paid time off which is equivalent to 2 weeks of paid time off.
In this case, you would make $56,160 per year.
This is the same as the example above for an annual salary making $27 per hour.
Case #2 – No Paid Time Off
Unfortunately, not all employers offer paid time off to their hourly employees. While that is unfortunate, it is best to plan for less income.
Life happens. There will be times you need to take time off for numerous reasons – sick time, handling an emergency, or even vacation.
So, let’s assume you take 2 weeks off without paid time off.
That means you would only work 50 weeks of the year instead of all 52 weeks. Take 40 hours times 50 weeks and that equals 2,000 working hours. Then, multiply the hourly salary of $27 times 2,000 working hours, and the result is $55,000.
40 hours x 50 weeks x $27 = $54,000
You would average $208 per working day and nothing when you don’t work.
$27 an Hour is How Much a year After Taxes
Let’s be honest… Taxes can take up a big chunk of your paycheck. Thus, you need to know how taxes can affect your hourly wage.
Also, every single person’s tax situation is different.
On the basic level, let’s assume a 12% federal tax rate and a 4% state rate. Plus a percentage is taken out for Social Security and Medicare (FICA) of 7.65%.
Gross Annual Salary: $56,160
Federal Taxes of 12%: $6,739
State Taxes of 4%: $2,246
Social Security and Medicare of 7.65%: $4,296
$27 an Hour per Year after Taxes: $42,878
This would be your net annual salary after taxes.
To turn that back into an hourly wage, the assumption is working 2,080 hours.
$42,878 ÷ 2,080 hours = $20.61 per hour
After estimated taxes and FICA, you are netting $20.61 an hour. That is $6.39 an hour less than what you thought you were paid.
This is a very highlighted example and can vary greatly depending on your personal situation. Therefore, here is a great tool to help you figure out how much your net paycheck would be.
Plus budgeting on a just over $20 an hour wage is much different.
$27 An Hour Salary Calculator
Now, you get to figure out how much you make based on your hours worked or if you make a wage between $27.01-27.99.
This is super helpful if you make $27.30, $27.40, or $27.88.
$27 an Hour Budget – Example
You are probably wondering can I live on my own making 27 dollars an hour? How much rent or mortgage payment can you afford on 27 an hour?
Using our Cents Plan Formula, this is the best-case scenario on how to budget your $27 per hour paycheck.
When using these percentages, it is best to use net income because taxes must be paid.
In this example, above we calculated that $27 an hour was $20.61 after taxes. That would average $3573 per month.
According to the Cents Plan Formula, here is the high-level view of a $27 per hour budget:
Basic Expenses of 50% = $1787
Save Money of 20% = $715
Give Money of 10% = $357
Fun Spending of 20% = $715
Debt of 0% = $0
Obviously, that is not doable for everyone. Even though you would expect your money to go further when you are making double the minimum wage. So, you have to be strategic in ways to decrease your basic expenses and debt. Then, it will allow you more money to save and fun spending.
To further break down an example budget of $27 per hour, then using the ideal household percentages is extremely helpful.
recommended budget percentages based on $27 per hour wage:
Category
Ideal Percentages
Sample Monthly Budget
Giving
10%
$468
Savings
15-25%
$936
Housing
20-30%
$1,076
Utilities
4-7%
$140
Groceries
5-12%
$311
Clothing
1-4%
$19
Transportation
4-10%
$164
Medical
5-12%
$234
Life Insurance
1%
$14
Education
1-4%
$23
Personal
2-7%
$70
Recreation / Entertainment
3-8%
$117
Debts
0% – Goal
$0
Government Tax (including Income Taxes, Social Security & Medicare)
15-25%
$1,107
Total Gross Income
$4,680
**In this budget, prioritization was given to basic expenses. Thus, some categories like giving and saving were less.
Can I Live off $27 Per Hour?
At this $27 hourly wage, you are more than likely double the minimum wage. Things should be easy to live off this $27 hourly salary.
However, it is still slightly above the $55,000 salary. That means it can still be a tough situation.
Is it doable? Absolutely.
In fact, $27 an hour is higher than the median hourly wage of $19.33 (source). That seems backward, but typically salaried workers earn more per hour than hourly workers.
Can you truly live off $27 an hour annually?
You just have to have the desire to spend less than your income. Plus consistently save.
If you are constantly struggling to keep up with bills and expenses, then you need to break that constant cycle. It is possible to be smart with money.
You need to do is change your money mindset.
This is what you say to yourself… Okay, I have aspirations and goals to increase how much I make. This is the time to start diversifying my income into multiple streams and start investing. I am going to stretch my 27 dollars per hour.
In the next section, we will dig into ways to increase your income, but for now, is it possible to live on $27 an hour.
Yes, you can do it, and as you can see it is possible with the sample budget of $27 per hour.
Living in a higher cost of living area would be more difficult. So, you may have to get a little creative. For example, you might have to have a roommate. Move to a lower cost of living area where rent is cheaper.
Also, you must evaluate your “fun spending” items. Many of those expenses are not mandatory and will break your budget. You can find plenty of free things to do without spending money.
5 Ways to Increase Your Hourly Wage
This right here is the most important section of this post.
You need to figure out ways to increase your hourly income because I’m going to tell you…you deserve more. You do a good job and your value is higher than what your employers pay you.
Even an increase of 50 cents to $27.50 will add up over the year. An increase to $28 an hour is even better!
1. Ask for a Raise
The first thing to do is ask for a raise. Walk right in and ask for a raise because you never know what the answer will be until you ask.
If you want the best tips on how specifically to ask for a raise and what the average wage is for somebody doing your job, then check out this book. In this book, the author gives you the exact way to increase your income. The purchase is worth it or go down to the library and check that book out.
2. Look for A New Job
Another way to increase your hourly wage is to look for a new job. Maybe a completely new industry.
It might be a total change for you, but many times, if you want to change your financial situation, then that starts with a career change. Maybe you’re stressed out at work.
Making $27 an hour is too much for you and you’re not able to enjoy life, maybe changing jobs and finding another job may increase your pay, but it will also increase your quality of life.
3. Find a New Career
Because of student loans, too many employees feel like they are stuck in the career field they chose. They feel sucked into the job that they don’t like or have the potential they thought it would.
For many years, I was in the same situation until I decided to do a complete career change. I am glad I did. I have the flexibility that I needed in my life to do what I wanted when I needed to do it. Plus I am able to enjoy my entrepreneurial spirit.
4. Find Alternative Ways to Make Money
In today’s society, you need to find ways to make more money. Period.
There is no way to get around it. You need to find additional income outside a traditional nine-to-five position or typical 40 hour a week job. You will reach a point where you are maxed on what you can make in your current position or title. There may be some advancement to move forward, but in many cases, there just is not much room for growth.
So, you need to find a side hustle – another way to make money.
Do something that you enjoy, turn your hobby into a way to make money, turn something that you naturally do, and help others into a service business. In today’s society, the sky is the limit on how you can earn a freelancing income.
Must Read: 20 Genius Ways on How to Make Money Fast
5. Earn Passive Income
The last way to increase your hourly wage is to start earning passive income.
This can be from a variety of ways including the stock market, real estate, online courses, book sales, etc. This is where the differentiation between struggling financially and becoming financially sound.
By earning money passively, you are able to do the things that you enjoy doing and not be loaded down, with having a job that you need to work, and a place that you have to go to. And you still make money doing nothing.
Here is an example:
You can start a brokerage account and start trading stocks for $50. You need to learn and take the one and only investing class I recommend. Learn how the market works, watch videos, and practice in a simulator before you start using your own money.
One gentleman started with $5,000 in his trading account and now has well over $36,000 in a year. Just from practice and being consistent, he has learned that passive income is the way for him to increase his income and also not be a slave to his job.
Watch his inspiring story!
Tips to Live on $27 an Hour
In this last section, grasp these tips on how to live on $27 an hour or just above $55k yearly salary. On our site, you can find lots of money saving tips to help stretch your income further.
Here are the most important tips to live on $27 an hour. More importantly stretch how much you make, in case you are in the “I don’t want to work anymore” mindset. Highlight these!
1. Spend Less Than you Make
First, you must learn to spend less than you make.
If not you will be caught in the debt cycle and that is not where you want to be. You will be consistently living paycheck to paycheck.
In order to break that dreadful cycle, it means your expenses must be less than your income.
And when I say income, it’s not the $27 an hour. As we talked about earlier in the post, there are taxes. The amount of taxes taken out of your paycheck is called your net income which is $27 an hour minus all the taxes, FICA, Social Security, and Medicare are taken out. That is your net income.
So, your net income has to be less than your net income.
2. Living Below Your Means
You need to be happy. And living on less can actually make you happier. Studies prove that less is better.
Finding contentment in life is one thing that is a struggle for most.
We are driven to want the new shiny toy, the thing next door, the stuff your friend or family member got. Our society has trained you that you need these things as well.
Have you ever taken a step back and looked at what you really need?
Once you are able to find contentment with life, then you are going to be set for the long term with your finances.
Here is our story on owning less stuff. We have been happier since.
3. Make Saving Money Fun
You need to make saving money fun. If you’re good, since you must keep your expenses low, you have to find ways to make your savings fun!
It could be participating in a no spend challenge for the month.
It could be challenging friends not to go to Target for a week.
Maybe changing your habits and not picking up takeout and planning meals.
Start to save 5000 in a year.
Whatever it is challenge yourself.
Find new ways of saving money and have fun with it.
Even better, get your family and kids involved in the challenge to save money. Tell them the reason why you are saving money and this is what you are doing.
Here are 101 things to do with no money. Free activities without costing you a dime. That is an amazing resource for you and you will never be bored.
And you will learn a lot of things in life you can do for free. Personally, some of the best ones are getting outside and enjoying some fresh air.
4. Make More Money
If you want if you do not settle for less, then find ways to make more money. If you want more out of life, then increase your income.
You need to be an advocate for yourself.
Find ways to make more money.
It could be a side hustle, a second job, asking for a raise, going to school to change careers, or picking up extra hours.
Whatever path you take, that’s fine. Just find ways to make more money. Period.
5. No State Taxes
Paying taxes is one option to increase what you take home in each paycheck.
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
It is very interesting if you take into account the amount of state taxes paid compared to a state with income taxes.
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area. The higher taxes income tax states include California, Hawaii, New Jersey, Oregon, Minnesota, the District of Columbia, New York, Vermont, Iowa, and Wisconsin. These states tax income somewhere between 7.65% – 13.3%.
6. Stick to a Budget
You need to learn how to start a budget. We have tons of budgeting resources for you.
While creating a budget is great, you need to learn how to use one.
You do not have to budget down to every last penny.
You need to make sure your expenses are less than your income and that you are creating sinking funds for those irregular expenses.
Budget Help:
7. Pay Off Debt Quickly
The amount that you pay interest on debt is absolutely absurd.
Unfortunately, that is how many of these companies make their money from the interest you pay on debt.
If you are paying 5% to even 20-21% or higher, you need to find ways to lower that debt quickly.
Here’s a debt calculator to help you. Figure out your debt-free date.
Make that paying off debt fast is your target and main focus. I can tell you from personal experience, that it was not until we paid off our debt that we finally rounded the corner financially. Once our debt was paid off, we could finally be able to save money. Set money aside in separate bank accounts and pay for cash for things.
It took us working hard to pay off debt. We needed persistence and patience while we had setbacks in our debt-free journey.
Jobs that Pay $27 an Hour
You can find jobs that pay $27 per hour. Polish up that resume, cover letter, and interview skills.
Job Search Hint: Always send a written follow-up thank you note for your interview. That will help you get noticed and remembered.
First, look at the cities that require a minimum wage in their cities. That is the best place to start to find jobs that are going to pay higher than the federal minimum wage rate. Many of the cities are moving towards this model so, target and look for jobs in those areas.
Possible Ideas:
Virtual Assistant – Get free training NOW!
Freelance writer
Class A Truck Driver
Managers
Entry Level Marketing Jobs
Data Entry Clerks
Customer service managers
Bank tellers
Maintenance workers
Freight broker – Learn how easy it is to start!
Administrative assistants
Athletic Trainers
Event Planners
Day trader
Security guard
Movers
Warehouse workers
Electrician
Licensed Practical Nurse (LPN)
Companies that pay more than $27 per hour: Wells Fargo, Disney World, Disney Land, Bank of America, Cigna, Aetna, etc
$27 Per Hour Annual Salary
In this post, we detailed 27 an hour is how much a year. Plus all of the variables that can impact your net income. This is something that you can live off.
How much is 27 dollars an hour annually…
$56,160
This is right between $56000 per year and $57k a year.
In this post, we highlighted ways to increase your income as well as tips for living off your wage.
Use the sample budget as a starting point with your expenses.
You will have to be savvy and wise with your hard-earned income. But, with a plan, anything is possible!
Still thinking I don’t want to work anymore, you aren’t alone and need to start to plan for your early retirement.
Learn exactly how much do I make per year…
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
Maybe you’ve recently spoken to a broker or financial adviser about investments, and they suggested exchange-traded funds (ETFs) as a way to diversify your portfolio and boost your earnings.
But, you don’t know how they work or how to go about adding them to your arsenal of investments. Or perhaps you’re just starting out and want to learn more before making an investment decision?
Either way, we’ve got you covered. Read on to learn more.
Key Takeaways
Exchange-traded funds (ETFs) are diversified investment vehicles that allow investors to buy shares in a collection of assets, ranging from stocks and bonds to commodities and currencies, functioning similarly to mutual funds, but trading like stocks on exchanges.
ETFs offer various types, including those focused on specific industries, commodities, or strategies like inverse or leveraged ETFs, catering to a wide range of investment objectives and risk tolerances.
The benefits of ETFs include lower administrative costs compared to mutual funds, flexibility in trading throughout the trading day, tax efficiency in capital gains, and the transparency of holding disclosure, making them an attractive option for both novice and experienced investors.
What are ETFs?
In a nutshell, an exchange-traded fund (ETF) is a basket of assets that can include a medley of the following:
Exchange-traded funds are ideal for individual investors because they allow you to diversify your holdings without purchasing individual shares of each asset. And the profits are generated by the performance of the overall ETF and not individual shares.
Furthermore, ETFs trade like stocks and are easily bought and sold on the stock exchange, making it simple for investors to buy and sell.
How do ETFs work?
Before exchange-traded funds hit the exchange for trading, they must be created by authorized participants or specialized investors. They conduct extensive research and choose the assets that they deem as most suitable for the portfolio.
The pool of assets is then divided into ETF shares and traded on a major stock exchange, like the NYSE or NASDAQ, or through a brokerage firm.
Each exchange-traded fund has a ticker symbol like a stock and intraday price that can be tracked throughout the day. But unlike mutual funds or index funds, prices are constantly fluctuating because ETF shares are issued and redeemed throughout the day.
Mutual funds are priced at the end of the trading day, so all buyers and sellers receive the same price. This is referred to as the NAV (net asset value.)
Individual investors can purchase ETFs, but the way returns are generated differs from what you’d see with stocks or bonds. Profits are not tied to the actual assets in the ETF, but a sum of the profits generated from interest and dividends from the overall ETF. The return is collectively based on your proportion of ownership in the ETF.
Types of ETFs
There’s no shortage of exchange-traded funds as offerings are designed to track various sectors, markets, and indexes both here in the U.S. and abroad. The types of ETFs that are most popular among investors include:
Actively managed ETFs: ETFs that are managed by a professional fund manager and traded on a stock exchange. They aim to outperform a specific benchmark or index by actively selecting and trading the securities in the fund’s portfolio.
Bond ETFs: ETFs that track a basket of bond securities, such as corporate bonds, government bonds, or municipal bonds.
Commodity ETFs: These ETFs track the price of a specific commodity, such as gold, silver, oil, or agricultural products.
Currency ETFs: ETFs that track the value of a specific currency, such as the US dollar, Euro, or Japanese yen.
Foreign market ETFs: The main objective for these ETFs is to track the performance of a specific foreign market, such as a specific country or region.
Inverse ETFs: A type of ETF that aims to produce the opposite return of a specific benchmark or index.
Leveraged ETFs: These ETFs use financial instruments, such as futures contracts and options, to amplify the returns of a specific benchmark or index.
Market ETFs: The main objective is to track a specific index. These include DIA (tracks the Dow Jones Industrial Average), Spider or SPDR (tracks the S&P 500 Index), and QQQ (tracks the Nasdaq 100).
Sector or Industry ETFs: The main objective is to track a sector or industry. Common sector ETFs include XLF (financial companies), OIH (oil companies), FONE (smartphones), and XLE (energy companies).
Stock ETFs: ETFs that track a basket of stocks, such as those in a specific index, sector, or country.
Benefits of ETFs
Diversified Asset Pool
With ETFs, you can invest with minimal effort to fit your taste in securities, risk tolerance, and investment goals. This also means you can choose from various market segments. Furthermore, poor-performing assets can offset those that are performing well.
Hands-off Management
Professional fund managers do all the work for you according to your investment objectives. They also continuously monitor the performance of the ETF. But since these investments are generally passive and track an index, your fund manager won’t have to spend a bulk of their time day in and day out managing the ETF to stay ahead of the curve.
Quick note: The exception to this rule applies when you’re dealing with an actively managed ETF that is designed to beat an index.
Flexible Purchase and Selling Window
Unlike mutual funds, ETFs are available for purchase at any time of the day. There’s also flexibility with orders as you can choose from margin, limit, or stop-loss orders. Even better, there are no minimum holding periods, like you’ll see with some mutual funds, so you’re free to sell at any point after you purchase ETF shares.
This added flexibility is also beneficial to investors because it minimizes the level of risk they’ll have to absorb if the market takes an unexpected turn for the worse. ETFs are much easier to unload in a shorter window than mutual funds, that sometimes have a 30-day holding period before they can be sold.
Tax Efficient
With taxable mutual funds, you must pay taxes on distributions, regardless of whether you keep the cash or use it to invest in more mutual fund shares. However, you will only pay capital gains on ETFs when your investment is sold.
Transparency
As mentioned earlier, the performance of a particular ETF can be tracked throughout the day using the ticker. And the end of each day, the ETF’s holdings are shared with the public. But mutual funds only disclose this information on a monthly or quarterly basis.
Lower Administrative Costs
Unless the ETF is actively managed, your administrative costs will be substantially lower than what you’d find with a portfolio that must have oversight at all times, like a mutual fund. On average, the expense ratio for most ETFs is lower than .20 per year, compared to the 1% or more per year in administrative costs that accompany actively managed mutual funds, according to Nasdaq.
But keep in mind that expense ratios aren’t the same across the board. So, it’s best to speak with the ETF issuer to get a better idea of what you’d expect to pay in administrative costs should you decide to invest in their ETFs.
Drawbacks of ETFs
Before you invest in ETFs, there are some drawbacks you should be mindful of.
Price Fluctuations
Prices often change, so you could be at a disadvantage if you like to buy in small increments. And it’s not always possible to buy low and sell high if the ETF is a slow mover.
Fees from Commissions
Looking to buy ETFs through an online broker? If you select an ETF that’s outside the scope of what they offer, you could incur substantial fees from brokerage commissions.
Sudden Death
If the ETF underperforms and is forced to shut down abruptly, you have no control over the hit you may take, either through a loss on your investment or tax obligation.
Settlement Window
When you sell ETFs, there’s a two-day settlement window that must pass before you can access your cash. This could be to your disadvantage if you need the funds right away to invest in another asset.
How to Invest in ETFs
To invest in exchange-traded funds (ETFs), you’ll need to follow these steps:
Choose a brokerage: First, select a brokerage firm where you will place your trades. Reputable options include well-known online brokers such as Charles Schwab, E*TRADE, Robinhood, and Fidelity. Be sure to compare fees, trading platforms, and other features before making your decision.
Open an account: Once you’ve chosen a brokerage, you’ll need to open a brokerage account and complete any required paperwork. This may include providing personal and financial information, as well as completing any necessary identity verification steps.
Fund your account: To buy ETFs, you’ll have to deposit money into your brokerage account. This can typically be done by linking a bank account or using a credit or debit card.
Select your ETFs: Once your account is funded, you’ll be able to browse and select the ETFs you’d like to purchase. Most brokerage firms offer a wide range of ETFs to choose from, including those that track specific indexes, sectors, or countries.
Place your trade: Once you’ve selected the ETFs you’d like to purchase, you can place your trade by specifying the quantity and price. Your brokerage firm will handle the rest of the process, including executing the trade and holding the ETF shares in your account.
Keep in mind that investing in ETFs carries risks, and it’s important to do your own research and consider your own financial goals and risk tolerance before making any investment decisions. It’s also a good idea to consult a financial professional for personalized advice.
Bottom Line
It’s easy to buy or sell ETFs and make them part of your investment strategy. By gaining a thorough understanding of how they work and working with a broker to analyze how they will impact your investment portfolio, you’ll have the best chance of maximizing your returns.
I’m currently in the process of buying a house. Even though I’ve done so in the past (spoiler alert: it didn’t end well), I still qualify as a “first-time home buyer” on this go-round, at least for mortgage purposes. Since it’s been more than three years since I had an ownership stake in a house, I qualified to buy with an FHA loan — and actually, that’s how I bought last time, too.
FHA loans are backed by the federal government (specifically, the Federal Housing Administration, hence their name), and administered by standard mortgage lenders. The requirements to use one are less stringent than for conventional home loans.
While a conventional mortgage often requires a credit score of 620 or better, many FHA lenders only require a score of 500. If your credit score is at least 580, you can get away with putting down just 3.5% on a home purchase. But if you can swing a 10% down payment, your credit score could be as low as 500.
Despite these perks, I opted against an FHA loan this time — I’m buying with a conventional loan instead. Here’s why.
I’m already paying more than I want to
Mortgage loans are far from cheap these days. As of this writing, the average rate on the classic 30-year fixed home loan sits at 6.88%, according to Freddie Mac. Compare that to rates at 3% in 2021! In real numbers, if you buy a $250,000 home with 10% down at a rate of 3%, your monthly payments for the loan and the interest will be just $1,094. Swap that 3% rate for one at the current average, and you’re signing on for monthly loan and interest payments of $1,624. Ouch. And even with a credit score over 800, I’m still not saving much on a mortgage rate.
Since I’m already paying more per month (and overall) to buy a house, I decided against going with an FHA loan, because it would cost me even more. I’m putting just 10% down on my home purchase, so I will have to pay for private mortgage insurance (PMI). This protects my lender in the event I stop making payments and it must repossess and resell my house. If you buy a home with a conventional loan and less than 20% down, you’ll pay for PMI.
More: Check out our picks for the best mortgage lenders
FHA loans come with mortgage insurance, too — it’s called MIP, or a mortgage insurance premium. Like PMI, payments are collected monthly — but there’s also an upfront payment to cover at closing. But unlike PMI, if you make a 10% down payment on a home with an FHA loan, you’ll pay MIP for 11 years. If you make the standard 3.5% FHA loan down payment, however, you’re stuck with MIP unless you refinance to a conventional loan.
With my conventional loan, once I reach 20% equity in my house, I can have my PMI payments canceled by my mortgage lender. With an FHA loan, I’d be paying more for longer — or paying to refinance the loan as soon as I got to 20% equity.
I wanted to be a more competitive buyer
I’m very aware of how competitive the current market is for buyers. The supply of homes for sale (just 2.9 months’ worth in February, according to the National Association of Realtors) is too low to equalize the market between buyers and sellers, so I knew I’d have to beat out other buyers to get an offer accepted.
On the lead up to finding the right house, making an offer, and getting it accepted, I looked at several that specified “cash or conventional” in their listings. This means that sellers were only willing to consider buyers paying cash or using a conventional loan, rather than a government-backed mortgage. Unfortunately, some sellers are wary of FHA loans because of the stricter appraisal requirements.
All homes bought with a mortgage go through appraisal, but in the case of a conventional loan, that appraisal is to assess value, not condition (that’s what a home inspection is for). But FHA appraisals also serve as a safety inspection for the home, which must meet certain livability standards for the loan to be approved. I didn’t want a seller to be leery of me as a buyer because of this extra layer of scrutiny.
If you’re an aspiring homeowner, it’s a great idea to assess all your mortgage options. Depending on your credentials, income, or background, you might have access to programs that can save you money on the home-buying process. I might not be using an FHA loan this time, but I’m sure glad the option exists — anyone who wants (and has the means) to buy a house should be able to.
Historically speaking, mortgage rates have remained relatively low since the Great Recession, with some fluctuation at times due to market conditions. As a result, a generation of homebuyers has become accustomed to a low 30-year fixed-rate mortgage.
But with mortgage rates on the rise, it can put a sour taste in the mouths of people trying to join the ranks of homeowners in the country. They may be thinking that they missed an opportunity to buy a home. However, it’s important to look at the history of mortgages and mortgage rates to put the current conditions into context.
The History of Mortgage Rates
The modern history of mortgage lending in the U.S. began in the 1930s with the creation of the Federal Housing Administration. From the 1930s through the 1960s, a combination of government policy and demographic changes made owning a home a normal part of American life. During this time, the 30-year fixed-rate mortgage became the standard for home mortgage loans.
When discussing the fluctuation of mortgage rate trends, analysts usually refer to the average 30-year fixed-rate mortgage. Here’s a look at the trend of these mortgage rates since the 1970s.
The 1970s
Throughout the 1970s, mortgage rates rose steadily, moving from the 7% range into the 13% range. This uptick in rates was due, in part, to the Arab oil embargo, which significantly reduced the oil supply and sent the U.S. into a recession with high inflation — known as stagflation.
As a result, Federal Reserve Chairman Paul Volcker made a bold change in monetary policy by the end of the decade, raising the federal funds rate to combat inflation. Though the Federal Reserve doesn’t directly set mortgage rates, its monetary policy decisions can still impact many financial products, including mortgages.
The 1980s
The average 30-year fixed-rate mortgage hit an all-time high in October 1981 when the rates reached 18.63%. The Federal Reserve’s tight monetary policy affected this high borrowing cost and put the economy into a recession. However, inflation was under control by the end of the 1980s, and the economy recovered; mortgage rates moved down to around 10%.
The 1990s and 2000s
Mortgage rates continued a downward trend throughout the 1990s, ending the decade at around 8%. At the same time, the homeownership rate in the U.S. increased, rising from 63.9% in 1994 to 67.1% in early 2000.
Several factors led to a housing crash in the latter part of the 2000s, including a rise in subprime mortgages and risky mortgage-backed securities.
The housing crash led to the Great Recession. To boost the economy, the Federal Reserve cut interest rates to make borrowing money cheaper. Mortgage rates dropped from just below 7% in 2007 to below 5% in 2009.
Recommended: US Recession History: Reviewing Past Market Contractions
The 2010s
Mortgage rates steadily decreased throughout most of the 2010s, staying below 5% for the most part. The Federal Reserve enacted a zero-interest-rate policy and a quantitative easing program to prop up the economy during this time following the Great Recession. This helped keep mortgage rates historically low.
The 2020s
The Federal Reserve reduced the federal funds rate to near-zero levels in March 2020, causing a drop in rates of various financial products. The effects of the fallout from the Covid-19 pandemic pushed mortgage rates below previous historic lows. The average 30-year fixed-rate mortgage hit 2.77% in August 2021.
However, with inflation reaching levels not experienced since the early 1980s, the Federal Reserve reversed course. The central bank started to tighten monetary policy in late 2021 and early 2022, which led to a rapid increase in mortgage rates. In May 2022, the average mortgage rate was above 5%. While this was below historical trends, it was the highest rate since 2018. From there, the 30-year fixed rate mortgage crept upward, reaching a high of 7.79% in October 2023 before declining to 7.1% in April 2024.
Recommended: How Inflation Affects Mortgage Interest Rates
First-time homebuyers can prequalify for a SoFi mortgage loan, with as little as 3% down.
Why Do Mortgage Rates Change?
As we can see from looking at interest rate fluctuations, major economic events can significantly impact mortgage rates both in the short and long term. As noted above, this has to do primarily with the Federal Reserve.
Federal Reserve actions influence nearly all interest rates, including mortgages through the prime rate, long-term treasury yields, and mortgage-backed securities. The Federal Reserve sets the federal funds benchmark rate, the overnight rate at which banks lend money to each other.
This rate impacts the prime rate, which is the rate banks use to lend money to borrowers with good credit. Most adjustable short-term rate loans and mortgages use the prime rate to set the base interest rates they can offer to borrowers. So, after the Federal Reserve raises or lowers rates, adjustable short-term mortgage loan rates are likely to follow suit.
Longer-term mortgage rates have also risen and fallen alongside economic and political events with movement in long-term treasury bond yields. In the short term, a Federal Reserve interest rate change can affect mortgage markets as money moves between stocks and bonds, affecting mortgage rates. Longer-term mortgage rates are influenced by Fed rate changes but don’t have as direct an effect as short-term rates.
Recommended: Federal Reserve Interest Rates, Explained
Can Changing Rates Affect Your Existing Mortgage?
If you have a mortgage with a variable interest rate, known as an adjustable-rate mortgage, changing rates can affect your loan payments. With this type of home loan, you may have started with an interest rate lower than many fixed-rate mortgages. That introductory rate is often locked in for an initial period of several months or years.
After that, your interest rate is subject to change — how high and how often depends on the terms of your loan and interest rate fluctuations. These changes are generally tied to the movement of interest rates, but more specifically, which index your adjustable-rate mortgage is linked to, which can be affected by the Fed’s actions.
However, most adjustable-rate mortgages have annual and lifetime rate caps limiting how high your interest rate and payments can change.
If you took out a fixed-rate mortgage, your initial interest rate is locked in for the entire time you have the home loan, even if it takes you 30 years to pay it off.
Recommended: What Is a Good Mortgage Rate?
The Takeaway
If you are in the market to buy a home, it might be tempting to rush and buy when mortgage rates drop a bit, or to put off buying until rates hopefully decrease in the future. However, choosing the perfect time to buy a home based on the ideal rate can be difficult. You’re probably better off letting your need for a home and your personal financial situation drive your decision making. (Do you have a down payment saved up? Is your debt under control?) When it’s time to buy, do your research and choose the best mortgage available for your personal situation.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% – 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It’s online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
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.
SoFi Mortgages Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
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.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Have you been asking yourself, “Should I move to Minneapolis, MN?” Located along the banks of the Mississippi River, Minneapolis is a dynamic city with a unique blend of natural beauty and urban charm. Known for its picturesque lakes, thriving arts scene, and diverse neighborhoods, Minneapolis always has something exciting in store. Whether you’re drawn to the city’s music and theater scene, its abundance of outdoor activities, or its friendly community, Minneapolis has plenty to offer for those looking to put down roots in the Land of 10,000 Lakes. In this article, we’ll discuss the pros and cons of living in this city to help you decide if it’s the right place for you. Let’s jump in.
Minneapolis at a Glance
Walk Score: 71 | Bike Score: 83 | Transit Score: 55
Median Sale Price: $330,000 | Average Rent for 1-Bedroom Apartment: $1,560
Minneapolis neighborhoods | Houses for rent in Minneapolis | Apartments for rent in Minneapolis | Homes for sale in Minneapolis
Pro: Flourishing arts scene
Minneapolis is renowned for its vibrant arts scene. The city is home to the Walker Art Center, one of the most celebrated contemporary art museums in the U.S., and the adjacent Minneapolis Sculpture Garden, famous for the iconic “Spoonbridge and Cherry” sculpture. Additionally, the Guthrie Theater offers world-class theatrical productions, and the First Avenue nightclub has played host to countless legendary performances. These venues provide residents with endless opportunities for artistic exploration and inspiration.
Con: Harsh winters
The winters in Minneapolis are notoriously brutal, with temperatures often plummeting below zero degrees Fahrenheit. The city experiences heavy snowfall, which can disrupt daily life, from commuting challenges to the simple act of walking outside. The city has efficient snow removal and a well-designed network of skyways in downtown areas that help pedestrians avoid the cold. However, the winter months can still be daunting for those not accustomed to such extreme weather conditions.
Pro: Abundance of lakes and parks
One of Minneapolis’s most charming features is its abundance of lakes and parks. The city’s park system is consistently ranked as one of the best in the country, offering residents access to over 22 lakes and more than 200 parks. From sailing on Lake Harriet to biking around Lake Calhoun (also known as Bde Maka Ska), the opportunities for recreation and relaxation are virtually limitless. This access to green space is a significant advantage of living in Minneapolis.
Con: Traffic congestion
Like many major cities, Minneapolis faces issues with traffic congestion, especially during rush hours. The city’s layout and reliance on a few major highways can lead to significant delays, particularly on I-35W and I-94, which are crucial routes for commuters. While public transportation options like the Metro Transit light rail and bus services offer alternatives, the traffic can still be a considerable inconvenience for residents.
Pro: Thriving job market
Minneapolis boasts a robust job market, particularly in the fields of healthcare, education, and technology. The city is home to several Fortune 500 companies, including Target, UnitedHealth Group, and Best Buy, providing ample employment opportunities. Additionally, the University of Minnesota, based in Minneapolis, is a significant employer and contributes to the city’s focus on research and innovation. This economic environment offers locals a wide range of career paths and other opportunities.
Con: Seasonal allergies
Due to its lush environment and diverse plant life, Minneapolis can be a challenging place to live for people with seasonal allergies. Spring and fall are particularly difficult times for allergy sufferers as the pollen from trees, grasses, and weeds reaches peak levels. While the city’s green spaces are a significant asset, they can also contribute to discomfort for a portion of the population.
Pro: Diverse culinary scene
Minneapolis’s culinary scene offers an array of dining options that reflect the city’s multicultural population. From the traditional Scandinavian dishes that pay homage to the city’s Nordic roots to the thriving East African cuisine found in neighborhoods like Cedar-Riverside, there’s something for every palate. The city also boasts a growing number of farm-to-table restaurants and craft breweries, highlighting Minnesota’s rich agricultural heritage and innovative spirit.
Con: Limited public transportation options
While Minneapolis has made strides in expanding its public transportation system, options can still be limited. The Metro Transit system, consisting of buses and light rail lines, does not fully cover the metropolitan area. This can make it difficult for those without cars to access certain parts of the city and surrounding suburbs. This limited Transit Score of 55 can affect daily commutes and restrict access to certain amenities and job opportunities for those relying on public transit.
Pro: Active lifestyle
Minneapolis encourages an active lifestyle, with its extensive network of bike lanes and trails, public parks, and recreational facilities. The city has been named one of the best biking cities in America, with over 200 miles of bike trails and dedicated lanes for cyclists. Whether it’s kayaking on the Mississippi River or cross-country skiing in Theodore Wirth Park, Minneapolis provides ample opportunities to stay active and engaged with the outdoors.
Jenna is a Midwest native who enjoys writing about home improvement projects and local insights. When she’s not working, you can find her cooking, crocheting, or backpacking with her fiancé.
Wednesday brought a full schedule of events and data for the bond market to digest and bonds dictate day to day changes in mortgage rates. The morning’s data was perfectly palatable, resulting in modest strength heading into the afternoon’s Fed announcement.
Contrary to impression given by many news headlines on Fed day, there is rarely any significance to the Fed’s actual decision to hike/cut/hold steady at any given meeting by the time the meeting actually happens. Markets will have long since priced in the likely outcome based on economic data and Fed policy transparency.
In other words, it was a surprise to no one that the Fed held rates steady at this meeting. Bond traders tuned in for other reasons–mainly to hear what Powell had to say at the 2:30pm ET press conference.
There were a few ways Powell could have framed the recent set-backs seen in inflation data. Some analysts thought he might say more to entertain the possibility of rate hike instead of a rate cut. Powell (and, indeed, the Fed announcement itself) definitely acknowledged that inflation data meant a delay for the Fed’s next move, but in the press conference, Powell reiterated that the next move was much more likely to be a cut, based on the trajectory of the data.
Bonds improved and many mortgage lenders were able to re-issue slightly lower rates compared to the morning levels. The average 30yr fixed rate is still elevated by 2024’s standards, but nicely lower compared to yesterday’s latest levels.
(Bloomberg) — UK house prices fell at the sharpest pace in eight months after the cost of mortgages crept higher, one of the country’s biggest lenders said, underscoring continued cost-of-living pressures on consumers ahead of a general election later this year.
Most Read from Bloomberg
The figures from Nationwide Building Society followed a scaling back of bets on Bank of England interest rate cuts this year, which pushed up the cost of home loans in markets. That’s strained the ability of people to afford to buy a property and held back a recovery from last year’s slump.
Higher borrowing costs have hurt Prime Minister Rishi Sunak’s government in the eyes of voters and reminded voters of the big jump in mortgage rates that Liz Truss triggered during her short term as premier in late 2022. The UK slipped into a recession last year, and the weak recovery so is reflected in the housing market.
“Though mortgage affordability is much better than it was last summer, it remains very stretched relative to historical norms,” said Peter Arnold, chief economist at EY UK. “A strong recovery in house prices and activity is unlikely.”
The Conservatives are defending seats in local authorities including mayors in West Midlands and Tees Valley in key local elections on Thursday. Sunak is widely expected to call a general election in the autumn.
Nationwide estimated house prices fell 0.4% in April after an 0.2% decline the month before. Economists had expected a 0.1% monthly increase. The average cost of a home is now £261,962 ($326,680), which is about 4% below the peak in the summer of 2022.
What Bloomberg Economics Says …
“The shift in the interest rate outlook was the catalyst for the change in sentiment at the start of the year, encouraging buyers to enter the market. However, borrowing costs have risen recently as investors reappraise how far the Bank of England will cut interest rates over concerns about persistent price pressures in both the UK and US. The best-buy five-year fix are above 4.1% having dropped below 4% at the start of the year. That will hit affordability.”
—Niraj Shah, Bloomberg Ecoomics. Click for the REACT.
Home prices have stagnated over the past year, up just 0.6%. That’s much less than the 1.2% gain economists had expected.
“The slowdown likely reflects ongoing affordability pressures, with longer term interest rates rising in recent months, reversing the steep fall seen around the turn of the year,” Robert Gardner, chief economist at Nationwide, said in a report Wednesday.
Nationwide said research it did with Censuswide found that almost half of the prospective first-time buyers looking to secure a home in the next five years have delayed their plans.
“Among this group, the most commonly cited reason for delaying their purchase is that house prices are too high (53%), but it is also notable that 41% said that higher mortgage costs were preventing them from buying,” Nationwide said.
Another 55% of people said they’d be willing to buy in a cheaper area of the country or where they could get a bigger property — half willing to move more than 30 miles away.
The UK housing market has defied expectations of a sharp downturn last year, yet its recovery over the last few months has remained weak. Prospective buyers are still finding it hard to come up with the money for a deposit, while the benchmark lending rate is at a 16-year high.
BOE officials warning of lingering price pressures have pushed up two- and five-year swap rates, used to set the bulk of mortgage products. That suggests households would still be spending a higher share of their incomes on mortgage payments than they did in the decade to 2007, according to Bloomberg Economics.
Nationwide’s figures contrast with more upbeat data from the BOE showing mortgage approvals rose to the highest in 18 months in March. Banks and building societies authorized 61,325 home loans, up from 60,497 in February and the most since September 2022.
Separate data released Tuesday from HM Revenue & Customs, the UK tax authority, showed property transactions climbing for a third month to 84,200 in March.
However, a recent resurgence in borrowing costs has raised questions over whether the recovery can continue. Natwest, Santander and Nationwide all have increased mortgage rates this month in response to rising swap rates, which are used to set the bulk of mortgage products.
For the 1 million households due to refinance fixed-rate mortgages by end of the year, new loans will be pricier than the ones they are currently on.
“Buyers and sellers are starting to accept the new reality of the housing market in the face of current interest rate levels,” said Nathan Emerson, CEO of Propertymark.
–With assistance from Andrew Atkinson.
(Updates with comment and context from first paragraph.)
95% of Parents Saving for Kids’ College Expenses Expect to Cover Over Half the Costs, According to Northwestern Mutual Planning & Progress Study 2 in 3 parents who are helping their kids cover college costs expect their children to pay for part of the educational expenses; 1 in 3 say the parents will pay for … [Read more…]
America’s housing crisis is real, and it’s getting worse. Home prices have shot up by anaverage of 30 percent over the past several years, and in 2023 home sales were lower than they had been in almost 30 years. A recent survey revealed that only 53 percent of non-homeowners believe they could one day own a home, while 12 percent say the possibility of owning a home feels “hopeless.” The Cold And Uncared For Society (CAUFS) defines housing as unaffordable if it costs more than 30 percent of an individual’s income, yet more than 18 million households in the U.S. currently pay more than half their income for housing.
In response to this crisis, independent presidential candidate Robert F. Kennedy Jr. has proposed a new federal home loans program, aiming to provide government-backed 3 percent mortgage bonds to anyone unable to afford a house.
“If you have a rich uncle who co-signs your mortgage, you will get a lower interest rate because the bank looks at his credit rating,” Kennedy said at a town hall in South Carolina. “I’m going to give everyone a rich uncle, and his name is Uncle Sam.”
This should ring an ominous bell to anyone trying to pay off federal college loans. Kennedy’s plan is essentially a clone of the federal student loans program but for first-time home buyers instead of teenage college students. The concept is that if you can’t buy a house because of insufficient funds, the government will lend you the money. What could possibly go wrong?
To answer this question, just look at what happened with federal student loans. Colleges know that students have access to easy loans, so they raise tuition with little fear of losing enrollment. This has resulted in a vicious cycle where college tuition far outpaces inflation, leaving millions burdened with crippling debt and limited financial opportunities after graduating.
As student loan debts ballooned, so did tuition rates. The Congressional Budget Office reports that between 1995 and 2017 federal student loan debt grew “from $187 billion to $1.4 trillion (in 2017 dollars).” This is because colleges kept raising tuition, knowing that students could borrow to cover it.
Al Lord, the former CEO of Sallie Mae—once the largest federal student loans lender—explained the phenomenon simply: “Schools were able to hike tuition since students now had expanded access to loans.” Lord further admitted that colleges raise tuition rates “because they can, and the government facilitates it.”
A study from the Federal Reserve Bank of New York revealed that each additional dollar in student aid corresponds to a 60-cent increase in tuition. The pattern is clear: more student aid means higher tuition.
Applying this logic to Kennedy’s home loan plan, it’s easy to see the potential pitfalls. If the government makes it easier to buy homes, will it lead to higher prices? Almost certainly, because Kennedy’s proposal doesn’t address the core problem: There aren’t enough houses in the market for people to buy.
Construction of multifamily housing units in America has declined by one-third since 1987, and of those built in 2021, only 5.4 percent were for sale as condominiums rather than rental apartments. This scarcity drives prices up, creating a market where even modest homes are out of reach for many.
Onerous regulations, such as single-family zoning, height restrictions, and permitting delays make it difficult to build more housing, which is the key to solving the crisis. Yet, these harmful rules persist because local politicians are afraid to upset residents who fear that new developments will raise housing costs. However, research shows in reality, these developments reduce the cost of housing.
A basic grasp of economics makes clear that when supply is low, prices go up. To lower prices, we certainly shouldn’t replicate the student loans debacle by giving people federal bonds that will undoubtedly lead to further price increases. We should build more homes.
If Kennedy wants to solve the housing crisis, he should start by understanding it.