Here we go with another week. After some positive economic data mortgage rates have moved slightly higher. We have several notable economic reports out over the next few days as well as the ongoing trade talk concerns, so rates could move around a little. Read on for more details.
Where are mortgage rates going?
Mortgage move higher after retail sales report
The retail sales report for June got released today, and it showed a healthy uptick of 0.5% from the previous month. Not only that, but the May reading got revised from a month over month rise of 0.8% to 1.3%.
All of the news outlets are reporting on this story and citing how it demonstrates that the U.S. economy finished out the second-quarter on a high note.
Given the perceived strength of the economy, financial market participants are taking on more risk today, moving money out of the safe haven of long-term government bonds and into stocks.
This is pushing the yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, up almost five basis points on the day.
Mortgage rates typically move in the same direction as the 10-year yield, so we’re seeing a little upward pressure to start the week.
Rate/Float Recommendation
Lock now before move even higher
Mortgage rates are on track to increase over the coming months as the Federal Reserve gets ready to, and follows through with more increases to the nation’s benchmark interest rate.
To avoid locking in a higher interest rate, we recommend that borrowers take action on a purchase or refinance, sooner rather than later.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
Retail Sales
Retail sales for June increased by 0.5% month over month. Retail sales less autos rose 0.4%. Retail sales less autos and gas ticked up 0.3%. The control group was unchanged.
Overall, it’s a solid report that points toward a strong finish for consumer spending in the second-quarter.
Empire State Mfg Survey
The General Business Conditions Index for July hit 22.6. That’s just a hair above the 22.0 that analysts had predicted.
Business Inventories
Business inventories increased by 0.4% in May.
Notable events this week:
Monday:
Retail Sales
Empire State Mfg Survey
Business Inventories
Tuesday:
Industrial Production
Housing Market Index
Fedspeak
Wednesday:
Housing Starts
EIA Petroleum Status Report
Beige Book
Fedspeak
Thursday:
Jobless Claims
Philadelphia Fed Business Outlook Survey
Friday:
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
Multiple holders of the Petal® 2 “Cash Back, No Fees” Visa® Credit Card — a card aimed at those with fair-to-good credit — received unwelcome news last week: Their no-fee cards will be replaced with a different Petal card that charges an $8 “monthly membership fee,” equivalent to $96 a year, as well as other fees for late payments, returned payments and certain transactions.
It’s the second shake-up for Petal cardholders in as many months. In May, some holders of the Petal® 1 “No Annual Fee” Visa® Credit Card were informed that their accounts, too, would start being charged an $8 monthly fee.
Here are the latest details on what’s changing.
Only certain cardholders are getting downgraded
Petal confirms that only select cardholders received this notice, but the company declined to share the specific criteria that led to the change in terms.
“This change applies only to this specific segment of existing Petal 2 members,” the company said in an email. “It does not apply to all Petal 2 members, and it does not apply to new Petal 2 applicants. For new applicants, and those who were not notified of a change, Petal 2 continues to be a card with no fees whatsoever.”
Affected cardholders will have their Petal 2 account replaced by a Petal 1 Rise account that charges the $8 monthly fee and earns the same rewards as Petal 2 — up to 1.5% cash back on all purchases. The annual percentage rate on the card will remain unchanged, according to Petal.
The Petal 1 Rise is a card originally conceived for users with poor-to-fair credit. Given this change, there will now be two versions of the Petal 1 Rise: the version for the downgraded Petal 2 cardholders and the one for everyone else that has a $59 annual fee and earns rewards only with specific merchants.
Although the company didn’t specify why terms are changing for certain cardholders, it did provide some context.
“While changes like these are not taken lightly, it is a relatively common industry practice for issuers to make changes to the products they are able to offer based on the economy and other factors,” Petal said. “Such changes have been very rare for Petal but may happen from time to time.”
Cardholders can opt out
Petal 2 cardholders who don’t want to be downgraded to the Petal 1 Rise can opt out via Petal’s app or by contacting the company, but doing so will result in the account being closed. An account closure can have a negative impact on your credit because it can reduce the age of your active credit accounts and/or increase your credit utilization ratio, both of which are factors in credit scores.
For many cardholders, it will make financial sense to opt out, especially if they’ve improved their credit enough to qualify for a different card with no annual fee. Timing is important, though. Applying for a new, lower-cost credit card before the Petal account is closed could enhance their prospects for approval.
Those who decide to keep the card and transition to the Petal 1 Rise will continue to use the same login information to manage their account. The new card is expected to be in mailboxes by Aug. 1, 2023, the same date the monthly membership fee goes into effect.
🤓Nerdy Tip
Cardholders should redeem cash-back rewards before opting out or else the rewards will be lost when the account is closed. Cardholders who transition to the Petal 1 Rise will continue to keep their cash-back rewards, according to Petal’s FAQ page.
What this means for Petal 2 cardholders
Credit cards change terms like credit limits, rates or incentives all the time, but for affected holders of the Petal® 2 “Cash Back, No Fees” Visa® Credit Card this is a major negative in nearly every way.
Instead of “no fees,” it’ll now cost nearly $100 a year to carry the card. That’s far more expensive than other credit cards for fair credit, and even more than some cards for bad credit. Petal’s alternative option to close the account to avoid that fee may disrupt many credit journeys that the company initially set out to help.
Home buyers and sellers are mostly on the sidelines right now.
Most homeowners with mortgages are sporting “golden handcuffs,” afraid to sell and give up interest rates that are many percentage points better than the current market.
With little available supply, prices that remain expensive and mortgage rates that are much higher than they were in recent years, buyers are waiting out the market.
The common denominator, of course, is those mortgage rates. When will they go down? That’s what a listener of the Clark Howard Podcast recently asked.
When Will Mortgage Rates Go Down? And How Far Will They Dip?
Do you think mortgage rates will fall?
That’s what a Clark listener wondered on the May 23 podcast episode.
Asked Aimee in Florida: “I’m a teacher and single mom in a fast-growing part of Florida. I want to sell my 100-year-old house since it’s worth double what I paid (about $170,000 in profit).
“Obviously it’s not a great time to turn around and buy again. How long would I have before capital gains tax to rent somewhere and hope the interest rates will come down? Do you think they will?”
Want to make an educated guess about mortgage rates in order to inform your housing decisions? Watch the monthly CPI number that the U.S. government uses to define inflation, Clark says.
As long as that number continues to decline, expect mortgage rates to follow.
“Mortgage rates are never going back to the artificially-manipulated 2% range barring some extremely unexpected event in the world,” Clark says. “Inflation is continuing to go down. Hopefully that trend line will continue.
“And so mortgage rates should settle lower than they are now. I’m putting this guess in the complete danger category. But I think we could see rates back in the 5s again. Very unlikely back in the 4s. Could be 15-year loans go back into the 4s.”
Clark noted that the Federal Reserve interest rates are slightly above the rate of inflation now, “which is where they should be.”
What the Collective Market Says About Future Rates
After peaking at a year-over-year increase of 9.1%, U.S. inflation fell below 5% in April for the first time in two years.
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The Fed hiked the effective interest rate to a range of 5% to 5.25% on May 3.
There’s some disagreement between what the Fed has been signaling in their public comments and market predictions. Investors still think that the Fed could cut interest rates as soon as this year, potentially to curtail a recession.
However, the two-year Treasury rates just climbed from 3.75% to 4.24% in less than three weeks. Meanwhile, the five-year and 10-year rates sit at 3.76% and 3.70% respectively. So the market is predicting rates to be 1.25% to 1.5% lower than they are now within the next two to five years.
According to Bankrate, the average 30-year fixed mortgage features an APR of 7.15% and the average 15-year fixed mortgage sits at 6.52%.
So you can see how market data supports Clark’s prediction of mortgage rates falling into the 5% range within the next couple of years, and maybe a touch below 5% for 15-year fixed mortgages.
Why Mortgage Rate Watchers Should Pay Attention to the Fed
The best indication of what’s going to happen will come from the Fed, which will meet five more times this year.
For a time this spring, the Fed signaled it may pause interest rate hikes. That coincided with several major bank failures and ongoing contagion concerns within the banking sector.
But the Fed also vowed to prioritize squeezing inflation out of the economy when it started hiking rates in March 2022. And it recently left the door open for it to continue hiking rates. Inflation has not been falling as swiftly. And at 4.9%, it’s still not close to the Fed’s stated goal of 2%.
If the Fed continues hiking rates longer than the market anticipates, you may have to wait longer for mortgage rates to decline. The opposite is also true.
Capital Gains Taxes on Real Estate
If you’ll recall, Aimee also was worried about potential capital gains taxes on the profit from a potential home sale.
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There’s great news for her on that front.
“Aimee, from the way you phrased the question, this is the house you live in. So you pocket that money tax-free. If you have a gain of up to $250,000 as a single individual, $500,000 as a couple, you just pocket that money,” Clark says.
“You don’t have to buy another property as long as you’ve been in it two years or longer. Two of the last five years. This $170,000 is tax-free money to you. And you can rent as long as you want after that.
“There used to be the rule that you had to buy a new place within a period of time. People were gaming that so much Congress finally was like, ‘Let’s make this simple,’ and came up with this new system that you just pocket the money. It’s almost like a house has become its own version of a Roth IRA if you live in the house.’”
Final Thoughts
If you’re part of the crowd that wants to buy a house but you’re waiting for better mortgage rates, you’ve got mixed news.
It’s highly unlikely that mortgage rates will revert back to historic numbers of 2-3%. However, based on all current data, there’s a pretty good chance that a 15-year fixed rate will flirt with dipping below 5% by the end of 2025.
You may save in the neighborhood of 1.5% on your mortgage rate if you can wait another few years, although that’s never guaranteed. And Clark has also predicted that home prices will stagnate for a few years.
In other words, it should be a better time to buy a home in a few years. But don’t expect some dramatic occurrence where you can get a 3% mortgage rate and 30% off of current home prices.
Since the mid-1990s, inflation has stayed very close to the Federal Reserve’s benchmark of 2% per year, often dipping much lower than that. The upshot has been a long run in which prices have changed little from year to year, with the noticeable exception of an 8% overall jump in 2022. Fortunately, current inflation has largely stabilized and, while still high compared with recent years and the Federal Reserve’s target rate, is back within overall historic norms. All told this has created an environment in which consumers don’t usually think about changing prices all that often.
For retirees, on the other hand, the picture is very different. They have to think in terms of years and decades. For them, inflation is a very powerful force. As prices rise decade over decade it can meaningfully eat away at your retirement savings unless you have prepared in advance. A financial advisor can help you better protect your retirement savings from the effects of inflation and plan for the future.
What Is Inflation?
Inflation measures changing prices in the marketplace. Specifically, it measures how prices increase for the same goods and services over time. For example, when the price of milk increases from $2.85 per gallon to $4.04 per gallon, that’s inflation. The opposite effect, when prices fall, is known as deflation and it is counterintuitively a borderline disaster for most households and consumers.
There are as many ways to measure inflation as there are economists, but the standard measure is known as the Consumer Price Index or CPI. It measures how prices change on an annual basis for a representative group of goods and services across the United States, omitting energy prices and agricultural products. These last two, while essential to household spending, are left out of the inflation statistics because they’re extremely vulnerable to geopolitical and natural events, respectively.
Economists consider a little bit of inflation beneficial. It shows that the economy is producing at capacity, which encourages growth. This is why the Federal Reserve has its inflation benchmark set at 2%, not zero.
For most households, inflation is reflected in both costs and incomes. As prices rise, employers typically increase pay scales to compensate. This is why economists treat inflation as such an emergency because it can create a feedback loop of rising incomes and prices with no natural stopping point. This also makes inflation, under ordinary circumstances, a minor issue. Most households don’t notice small price adjustments over short time frames and pay increases help them keep up over the long run.
Costs of Living in Retirement
In retirement, your basic math is simple: money in vs. money out. If your retirement accounts can generate more money than you spend, you can afford to retire.
The problem with inflation is that it gradually changes the math in this formula. Each year, your “money out” gets a little bit more expensive. Up front, it’s hard to notice. If a gallon of milk goes up by $0.02, that doesn’t stand out. But in the aggregate, these changes add up. For example, say that your costs come to $5,000 in spending per month. With 2% inflation, the next year you would spend $5,100 per month. The year after that, $5,202. The year after that, $5,306.
Even with just a 2% annual price increase, within just three years of retirement, you’re spending $300 more per month than you initially budgeted. And since retirement lasts for decades, inflation has plenty of time to set in.
Some Areas Are Particularly Vulnerable
One of the biggest things to remember about inflation is that it often hits some areas harder than others. For example, a disproportionate and large amount of 2022’s high inflation came courtesy of astronomical prices in the used and rental car markets. For retirees, this can be a double-edged sword depending on how you have structured your finances. You might be safe from some of the worst sectors or you might be particularly exposed.
A few costs of living that are particularly vulnerable to inflation and price swings are:
Housing: In recent decades the cost of housing has risen sharply. If you own a home, whether it’s paid off or on a fixed mortgage, you’re safe from these rising costs. If you rent, particularly in a big city, this will be a huge cost sector as prices go up year-over-year.
Energy and food: These two sectors are omitted from the core inflation measure because they’re extremely volatile. However, that volatility tends to make them particularly sensitive to inflation across the marketplace at large. That’s a particularly big problem because, ultimately, utilities and groceries make up the bulk of most households’ bottom line and just because they’re not in the BLS’ official report doesn’t mean you won’t feel the squeeze.
Imports: Historically, imported goods tend to experience inflation earlier and sooner than most other products in the marketplace. If you buy or rely on products brought in from overseas, this will show up in your budget.
Travel: If you want to travel in your retirement, inflation can make that more expensive. Airfare often jumps during periods of inflation and if you are leaving the country a weaker dollar will make your trip that much more expensive.
Savings and Social Security
Most retirees rely on three sources of income for the “money in” side of their retirement: savings, investments and Social Security. Let’s take a look at each.
Savings: Savings generally refers to the money you have in cash or cash-like assets. Basically, this refers to the money you have in banking products like checking, savings and certificates of deposit. The appeal of keeping money in savings is a certainty. Just putting everything into a savings account is about the lowest-risk option short of buying Treasury bonds. However, it also exposes your money to near-constant erosion. This feels like the safe option, but keeping all your money in the bank is a good way to effectively lost it little by little rather than all at once.
Low-Risk Investments: Low-risk investments tend to include assets like bonds and annuities. These are the middle ground between growth and safety. You want some growth but are willing to sacrifice potential gains for the confidence that you’ll get your money back. These are a mixed bag when it comes to long-term inflation management. The biggest problem is that low-risk investments often define their gains up-front.
Higher-Reward Investments: The most common footprint for a high-reward investment in stocks is either buying shares of an individual company or buying into industry or index funds. These are the growth end of the risk-reward balance. You will get the strongest returns but with the most risk. High-reward investments are the best way to manage inflation in the long run, since strong returns are the best way to keep your investments current with rising prices.
Social Security: Finally, most retiree households depend on Social Security to one degree or another. When it comes to inflation, this is the good news. Each year the Social Security Administration issues its annual COLA or “Cost of Living Adjustment.” This increases the monthly benefits issued to all recipients based on the government’s benchmark inflation rate. The COLA is based on national inflation figures. When prices go up, they tend to increase more in some areas than in others.
How To Address Inflation
So this is what inflation does. It tends to erode the value of low-growth assets and income as prices increase faster than the value of investments. Here are two things you can do to address inflation.
1. Manage Investments
The best way to address inflation in your retirement is to plan for it upfront. Specifically, build your retirement portfolio with inflation in mind. This can mean a few different things, such as investing in:
All of these assets tend to be sensitive to inflation. Stocks and REITs tend to grow with the value of the market, as companies increase their prices to keep pace with inflation. Short-term bonds, meanwhile, mature every few years, allowing you to reinvest in new assets that may better reflect current pricing. And some annuities offer an inflation-adjusted payment schedule, allowing you to plan for long-term growth in your returns.
2. Manage Costs
The biggest issue here is housing. The cost of housing has soared in recent decades and that fever shows no serious signs of breaking. This is most prominent in the rental market. Buying a home before you enter retirement, even if that means downsizing from your apartment, can help you secure your housing costs going forward.
If you own a paid-off home, you won’t have to plan for housing payments. If you start a mortgage prior to retirement, you will at least have fixed rather than escalating costs. Beyond that, prepare a good cash reserve for the wide fluctuations common to the energy and food sectors. These two areas are most prone to volatile price swings, both up and down, during periods of inflation.
The Bottom Line
Inflation can significantly eat away at your retirement savings. It’s important to build a retirement plan that anticipates enough growth to offset this, otherwise, you can see your quality of life decline as your bills get more expensive year after year. It’s important to take the necessary steps to protect your retirement savings.
Inflation Management Tips
The other best way to make plans is with good, solid help. A financial advisor can help you determine how inflation will impact your ability to save what you will need for retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
The best way to make plans is with hard, solid numbers. Run your retirement plans through our inflation calculator to get a sense of whether you’re on the right track.
Eric Reed
Eric Reed is a freelance journalist who specializes in economics, policy and global issues, with substantial coverage of finance and personal finance. He has contributed to outlets including The Street, CNBC, Glassdoor and Consumer Reports. Eric’s work focuses on the human impact of abstract issues, emphasizing analytical journalism that helps readers more fully understand their world and their money. He has reported from more than a dozen countries, with datelines that include Sao Paolo, Brazil; Phnom Penh, Cambodia; and Athens, Greece. A former attorney, before becoming a journalist Eric worked in securities litigation and white collar criminal defense with a pro bono specialty in human trafficking issues. He graduated from the University of Michigan Law School and can be found any given Saturday in the fall cheering on his Wolverines.
With concern over global trade easing financial market participants have been moving more into stocks and out of bonds, creating some upward pressure on mortgage rates. At the end of the day, though, rates are still hovering around the tight range they’ve been in for several months now. Read on for more details.
Where are mortgage rates going?
Rates increase this week
Current mortgage rates have gradually moved higher this week. After several weeks of concern over the global trade war, financial market participants moved into the safe haven of government bonds.
For the past couple of weeks we have seen this trend reverse itself with investors beginning to take on more risk and push more money into stocks. So now we’re seeing demand for long-term Treasury yields move lower, sending yields higher.
The yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) has ticked up about ten basis points since last Friday.
Mortgage rates typically move in the same direction as the 10-year yield so we’ve seen rates rise from the previous week. Here are the numbers from today’s Freddie Mac Primary Mortgage Market Survey (PMMS):
The average rate on a 30-year fixed rate mortgage increase two basis points to 4.54% (0.5 points)
The average rate on a 15-year fixed rate mortgage rose two basis points to 4.02% (0.4 points)
The average rate on a 5-year adjustable rate mortgage remained flat at 3.87% (0.4 points)
Here is what the Freddie Mac Economic and Housing Research Group had to say about rates this week:
“Mortgage rates moved up slightly over the past week to their highest level since late June.
The next few months will be key for gauging the health of the housing market. Existing sales appear to have peaked, sales of newly built homes are slowing and unsold inventory is rising for the first time in three years.
Meanwhile, affordability pressures are increasingly a concern in many markets, as the combination of continuous price gains and higher mortgage rates appear to be giving more prospective buyers a pause. This is why new and existing-home sales are not breaking out this summer despite the healthy economy and labor market.”
Rate/Float Recommendation
Lock now before move even higher
Mortgage rates have increased the past couple of weeks. With the Federal Reserve expected to raise the nation’s benchmark interest rate over the coming months, it’s reasonable to expect that mortgage rates will rise as well. It therefore makes sense that if you’re going to buy a home or refinance your current mortgage, you should do so sooner rather than later.
Learn what you can do to get the best interest rate possible.
Today’s economic data:
Durable Goods Orders
Durable goods orders in June rose 1.0% from the previous month. Durable goods minus transportation ticked up 0.4%. Core capital goods rose 0.6%.
International Trade in Goods
The nation’s trade deficit widened to $68.3 billion in June.
Jobless Claims
Applications filed for U.S. unemployment benefits came in at 217,000 for the week of 7/26/18. That puts the 4-week moving average at 218,000.
Notable events this week:
Monday:
Chicago Fed National Activity Index
Existing Home Sales
Tuesday:
FHFA House Price Index
PMI Composite Flash
Richmond Fed Manufacturing Index
Wednesday:
New Home Sales
EIA Petroleum Status Report
Thursday:
Durable Goods Orders
International Trade in Goods
Jobless Claims
Friday:
GDP
Consumer Sentiment
*Terms and conditions apply.
Carter Wessman
Carter Wessman is originally from the charming town of Norfolk, Massachusetts. When he isn’t busy writing about mortgage related topics, you can find him playing table tennis, or jamming on his bass guitar.
Rates may not be as high as they were several months ago or as low as they were 5 weeks ago, but they’re close enough to either boundary that the threat (or promise) of returning is palpable. For at least the past 2 weeks, we’d been waiting for this week’s events to give us some sort of push higher or lower, but it looks like the waiting will continue.
The two key events in question were Tuesday’s release of the Consumer Price Index (CPI) and Wednesday’s Fed Announcement. CPI is the most widely followed inflation metric among regularly scheduled economic reports. It comes out once a month and has had a huge impact on rates many times over the past 2 years. This time around, it happened to be scheduled to come out a day before a particularly important Fed policy announcement.
Year-over-year CPI was destined to continue falling in this week’s report simply because it was so high 13 months ago (i.e. it’s a 12 month calculation and there was no way the current month would be as bad as the month that just got bumped out of the equation).
Month-over-month numbers filter out the impact of the past and show more detail. This is where we see the first stalemate that went unresolved this week. Simply put, month-over-month inflation remained perfectly inside the increasingly narrow sideways range that’s been intact for almost 2 years. This offered precious little guidance for the Fed announcement the following day.
Most of the market expected the Fed to hold its policy rate steady at this meeting. “Policy rate” refers to the Fed Funds Rate which applies to overnight lending between large financial institutions–something that changes no more than once every 6 weeks and that has a limited impact on things like mortgage rates by the time the Fed actually hikes/cuts.
Longer term rates (like those for mortgages) are far more interested in the forward-looking trajectory of the Fed’s rate path. At every other meeting, the Fed releases a Summary of Economic Projections. The crowd favorite is “the dots”–a reference to the dot plot that shows each Fed member’s assumptions about where the policy rate will be in the near future.
This instance of the dots was particularly interesting because it would offer insight as to whether the Fed was indeed simply pausing rate hikes or if it thought it might have reached the ceiling. On that topic, the dots left little to the imagination with the average vote clearly moving 0.50% higher, thus implying 2 more rate hikes in 2023. All that without any strong guidance from the CPI data. One can imagine the dots may have been higher if CPI had come in hot.
Markets were initially unhappy to see the Fed’s inclination toward even tighter policy, but found solace in the press conference with Fed Chair Powell. In it, he offered his typical reminder that the dots are merely projections and not predictions or forecasts (whatever that means). If he could speak more candidly, he’d likely say something like “the dots are just a guess based on how things look today. We force these people to pick a number. Most pick wrong. And depending on how the economy changes, most will change their guess in 12 weeks when the next dots come out.”
Powell went on to say that the Fed hadn’t even decided that it would hike rates at all again. It would be taking the decision on a meeting by meeting basis depending on how the data evolved. To say that places increased emphasis on economic reports would be an understatement. With some showing strength and others promising recession, it’s no surprise to see a volatile, sideways range remain intact.
In terms of 10yr yields, the short term sideways range is probably too narrow to last much longer, but it has offered solid guideposts recently.
In the bigger picture, the range isn’t as perfectly sideways. It’s more of a battle to return under the 3.4% level.
As per usual, the trends in 10yr yields substantially reflect the trends in mortgage rates.
So what does the data say about how things might evolve in the near future? Truly, that’s up for debate! The following chart from economist Justin Wolfers made rounds on Friday, tacitly shouting that it’s ridiculous to expect a recession right now based on most economic data.
At almost exactly the same time, Wells Fargo economists put out their weekly note with some thoughts on recent trends in the Leading Economic Indicators index ahead of next week’s update, saying:
“In a world chock-full of backward-looking economic data, forward-looking indicators like the Leading Economic Index (LEI) are decidedly valuable. Unfortunately, the LEI has been quite consistent in its signal of recession. The six-month average change of this index has registered below the threshold historically consistent with a downturn for 10 straight months. The LEI’s downdraft is also picking up speed, suggesting that a turn in the business cycle is more likely than not.”
It’s quite easy to ping pong the debate back and forth between “recession” and “it’s not so bad” with other data out this week. While we’re on the topic of sentiment surveys how about Consumer Sentiment itself? It may be historically low, but it has also been trending fairly consistently higher (in stark opposition of the trend seen in the chart above).
On a more recessionary note, weekly jobless claims have hit the highest levels since 2021 on two consecutive weeks.
And if we filter out the noise associated with the pandemic, these are actually the highest levels since late 2017.
As long as there are compelling ways to make cases for opposite economic outcomes, rates will find it easier to remain broadly sideways, but with big, volatile swings between the prevailing highs and lows. It’s a waiting game for now.
A couple of important mortgage rates sank over the last seven days. 15-year fixed and 30-year fixed mortgage rates both trended lower. At the same time, average rates for 5/1 adjustable-rate mortgages increased.
After hiking interest rates 10 times since March 2022, the Federal Reserve pumped the brakes during its June meeting. The central bank’s benchmark federal funds rate will remain at a range of 5.00% to 5.25% for the time being, although the Fed hasn’t ruled out the possibility of further increases if inflation doesn’t continue to moderate.
As long as inflation continues to trend downward, experts say a pause in rate hikes from the Fed could bring some stability to today’s volatile mortgage rate market.
Mortgage rates change every day. Experts recommend shopping around to make sure you’re getting the lowest rate. By entering your information below, you can get a custom quote from one of CNET’s partner lenders.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Mortgages hit a 20-year high in late 2022, but now the macroeconomic environment is changing again. Rates dipped significantly in January before climbing back up in February. Aside from a brief surge towards the end of May, rates continue to fluctuate in the 6% to 7% range.
Even though the Fed hit pause on rate hikes, mortgage interest rates will continue to fluctuate on a daily basis. That’s because mortgage rates aren’t tied to the federal funds rate in the same way other products are, such as home equity loans and home equity lines of credit, or HELOCs. Mortgage rates respond to a variety of economic factors, including inflation, employment and the broader outlook for the economy.
“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree. “I don’t anticipate them to spike or even show a sustained spike following this meeting,” Channel said.
Overall, inflation remains high but has been slowly, but consistently, falling every month since it peaked in June 2022.
After raising rates dramatically in 2022, the Fed opted for smaller, 25-basis-point increases in its first three meetings of 2023. The decision to hold rates steady on June 14 suggests that inflation is cooling and ongoing rate hikes may no longer be necessary to bring inflation down to the Fed’s 2% target. The central bank is unlikely to cut rates any time soon, but positive signaling from the Fed and cooling inflation may ease some of the upward pressure on mortgage rates.
“Rates are getting to a point of being steady. So, it’s more a question of how long it will take for rates to start ticking back down and when inflation will return to a place where your dollar starts buying a little bit more each month,” said Kevin Williams, founder of Full Life Financial Planning.
However, mortgage rates remain well above where they were a year ago. Fewer buyers are willing to jump into the housing market, driving demand down and causing home prices in some regions to ease, but that’s only part of the home affordability equation.
“Interest rates have been much higher in the past and people bought homes and financed homes at those rates. But it’s been hard for people to react to such a rapid increase in just a short amount of time,” said Daniel Oney, research director at the Texas Real Estate Research Center at Texas A&M University. “Everybody had a target for how much they needed to save in order to go into the housing market, but when interest rates increased, those goal posts moved too,” he added.
What does this mean for homebuyers this year? Mortgage rates are likely to decrease slightly in 2023, although they’re highly unlikely to return to the rock-bottom levels of 2020 and 2021. However, rate volatility may continue for some time. “Expect mortgage rates to yo-yo up and down in the first half of the year, at least until there is a consensus about when the Fed will conclude raising interest rates,” said Greg McBride, CFA and chief financial analyst at Bankrate. McBride expects rates to fall more consistently as the year progresses. “Thirty-year fixed mortgage rates will end the year near 5.25%,” he predicts.
Rather than worrying about market mortgage rates, homebuyers should focus on what they can control: getting the best rate they can for their situation.
“The most important thing is that they find the right home. The second most important thing is obviously to find the most efficient way to finance it,” said Melissa Cohn, regional vice president of William Raveis Mortgage.
Take steps to improve your credit score and save for a down payment to increase your odds of qualifying for the lowest rate available. Also, be sure to compare the rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you compare apples to apples.
30-year fixed-rate mortgages
The average 30-year fixed mortgage interest rate is 7.00%, which is a decline of 6 basis points from seven days ago. (A basis point is equivalent to 0.01%.) Thirty-year fixed mortgages are the most common loan term. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one — but typically a higher interest rate. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.41%, which is a decrease of 4 basis points from seven days ago. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a larger monthly payment. But a 15-year loan will usually be the better deal, if you can afford the monthly payments. You’ll usually get a lower interest rate, and you’ll pay less interest in total because you’re paying off your mortgage much quicker.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 6.13%, an increase of 5 basis points compared to a week ago. For the first five years, you’ll typically get a lower interest rate with a 5/1 adjustable-rate mortgage compared to a 30-year fixed mortgage. However, you might end up paying more after that time, depending on the terms of your loan and how the rate shifts with the market rate. Because of this, an adjustable-rate mortgage could be a good option if you plan to sell or refinance your house before the rate changes. If not, changes in the market could significantly increase your interest rate.
Mortgage rate trends
Mortgage rates were historically low throughout most of 2020 and 2021 but increased steadily throughout 2022. Now, mortgage rates are roughly twice what they were a year ago, pushed up by persistently high inflation. That high inflation prompted the Fed to raise its target federal funds rate seven times in 2022. By raising rates, the Fed makes it more expensive to borrow money and more appealing to keep money in savings, suppressing demand for goods and services.
Mortgage interest rates don’t move in lockstep with the Fed’s actions in the same way that, say, rates for a home equity line of credit do. But they do respond to inflation. As a result, cooling inflation data and positive signals from the Fed will influence mortgage rate movement more than the most recent 25-basis-point rate hike.
We use information collected by Bankrate to track rate changes over time. This table summarizes the average rates offered by lenders across the country:
Current average mortgage interest rates
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.00%
7.06%
-0.06
15-year fixed rate
6.41%
6.45%
-0.04
30-year jumbo mortgage rate
7.03%
7.06%
-0.03
30-year mortgage refinance rate
7.13%
7.16%
-0.03
Rates as of June 19, 2023.
How to find personalized mortgage rates
To find a personalized mortgage rate, meet with your local mortgage broker or use an online mortgage service. When looking into home mortgage rates, consider your goals and current finances.
A range of factors — including your down payment, credit score, loan-to-value ratio and debt-to-income ratio — will all affect your mortgage rate. Generally, you want a higher credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.
Apart from the mortgage interest rate, other factors including closing costs, fees, discount points and taxes might also impact the cost of your house. Make sure to shop around with multiple lenders — such as credit unions and online lenders in addition to local and national banks — in order to get a mortgage loan that’s best for you.
What’s the best loan term?
One important thing to consider when choosing a mortgage is the loan term, or payment schedule. The mortgage terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are the same for the life of the loan. For adjustable-rate mortgages, interest rates are the same for a certain number of years (most frequently five, seven or 10 years), then the rate adjusts annually based on the market rate.
One factor to think about when deciding between a fixed-rate and adjustable-rate mortgage is the length of time you plan on living in your house. For people who plan on staying long-term in a new house, fixed-rate mortgages may be the better option. Fixed-rate mortgages offer greater stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages might offer lower interest rates upfront. If you aren’t planning to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage might give you a better deal. The best loan term is entirely dependent on your specific situation and goals, so make sure to think about what’s important to you when choosing a mortgage.
As was widely expected, the Federal Reserve held rates steady today. Mortgage rates were also generally steady, but the two have little to do with one another.
Because the Fed was almost certain to “pause” its rate hike campaign today, the pause didn’t have a material impact on the bond market. The Fed Funds Rate is an ultra-short-term rate that applies to interbank borrowing on an overnight basis. Mortgage rates, on the other hand, are determined by bonds that last an average of several years at the very least, and up to 30 years in some cases.
Longer term rates and shorter term rates often do different things. Today is a decent enough example with 2 year Treasury yields rising 0.015% and 10yr Treasury yields falling 0.037%. This wasn’t destined to be the case right at the time of the Fed announcement, however, because the Fed’s dot plot (a chart released 4 times a year that shows the Fed’s best guess at the path of the Fed Funds Rate in the coming years) suggested the median view is that two more rate hikes will be needed this year.
The upgraded dots spooked the bond market briefly. 30 minutes later in the regularly scheduled press conference, Fed Chair Powell reminded the market that the dots are simply a best guess on how Fed members think conditions will unfold. If conditions don’t unfold that way, there wouldn’t be two more hikes. Moreover, Powell explicitly stated that nothing has been decided about future meetings and the word “skip” is not the right way to refer to today’s absence of a rate hike.
In other words, if the economy and inflation play ball, the Fed won’t necessarily need to hike rates again during this cycle. That’s the kind of thing that tends to lie at the beginning of a longer term trend toward lower rates. It’s also the kind of thing that would still take a few months to confirm, assuming the data suggests lower inflation and a more downbeat economy.
Mortgage rates briefly hit 7% on average today (they were already quite close, yesterday) before edging back down into the high 6’s by the end of the day. Mid day changes in rates are not an everyday occurrence, but they’re common when the bond market makes big enough moves during business hours.
The gig economy was just beginning to blossom pre-pandemic. Between 2010 and 2020, the number of gig workers or side hustlers increased by 15%. Unlike many aspects of life, which stagnated during the pandemic, freelancing only grew. Statista reported that 73.3 million people work as freelancers in the U.S. right now, an increase from 57.3 million pre-pandemic.
Freelancing has tremendous benefits for many people. Freelancing or gig work can provide:
Flexibility
A better work-life balance
Increased income potential
But it can come with some financial complications, too.
As a freelancer, you’ll need to manage cash flow so that you’ll have money in your account to pay your bills. You’ll be responsible for paying your own taxes. And, with that in mind, you’ll want to track expenses carefully so that you can deduct the costs of running your freelance business from your bottom line.
That’s where having a business bank account can come in handy.
Why You Need a Bank Account If You Have a Side Hustle
According to tax laws, you don’t have to have a business bank account to run a side hustle or a freelance business. You can file your taxes using your Social Security number and receive a 1099 form as a sole proprietor.
But as your business grows, you may want to incorporate under a tax ID number. You may choose to register as a corporation like an S-Corp or, more commonly, a limited liability corporation or LLC. This can get confusing, so it’s important to speak to a tax account before you take this step.
If you incorporate your business, you’ll need a business checking account to keep your personal finances separate from your business expenses. You would pay yourself a salary out of your business account and use your personal bank account to pay for your daily living expenses, entertainment, and anything that isn’t considered a business expense.
Benefits of Business Accounts
Most small business owners, freelancers and side hustlers prefer to open a business account even if they aren’t incorporated. Having a dedicated business checking account makes it easier to track your business income and expenses, which makes filing taxes – and making quarterly estimated tax payments – easier. If you ever get audited, you’ll have a clear record of your personal and business finances.
Plus, if you do any sales and marketing for your freelance business, your business debit card can often pique people’s interest. You’d be surprised how having a debit card with your business name on it can help you generate leads in odd places, whether you’re at your favorite bar or paying for groceries.
If you’re ready to open a separate business account, it’s important to find one that will meet your needs.
Freelancer vs. Side Hustler vs. Entrepreneur
Before you choose a business account, you may be wondering about the differences between entrepreneurs, freelancers, and side hustlers. Which category do you fit in?
These are all loose terms to describe anyone who owns their own business or is self-employed. Self-employed is a tax designation, which means you are a 1099 contractor for other companies. This term would apply to most freelancers and side hustlers.
On the other hand, if you start your own business, you might consider yourself an entrepreneur. The dictionary defines an entrepreneur as someone who starts a business and is willing to take a financial risk in hopes of great success.
A freelancer may also take financial risks, including leaving a steady paying job. In a lot of cases, whether you describe yourself as an entrepreneur, small business owner, freelancer or side hustler is up to you.
Compare the Best Freelancer Checking Accounts
In most cases, business owners, freelancers and side hustlers can all benefit from a good business bank account. Read on as we compare the best business checking accounts for freelancers, gig workers, and entrepreneurs.
1. Lili Bank: Overall Best Bank for Freelancers
Lili calls itself “the one-stop shop for all your small business financial needs.” An online financial services company that provides business banking, accounting for freelancers, invoicing, and tax support, Lili is backed by Choice Financial Group Inc.
As a US-based bank, Choice is a member FDIC, which means your funds deposited in Lili are protected by the federal government up to $250,000 per account.
What sets Lili apart as one of the best bank accounts for freelancers?
In addition to all the other services it offers to business owners, Lili has no minimum balance requirements, no monthly fees for basic checking, and a network of 38,000+ fee-free ATMs nationwide. You can also open a business savings account and earn 1.50% APY at Lili.
Lili’s basic business checking account has no monthly fee, expense categorization for your purchases, and the ability to generate quarterly expense reports.
Alternatively, for $9 per month, you can earn 1.5% on savings, get a Visa business debit card with cashback rewards, overdraft protection up to $200 and tax, invoicing software, and accounting support.
Lili integrates with third-party services that gig workers may use, including Etsy, Shopify, Venmo, QuickBooks, and your PayPal business account.
When you compare the prices of other invoicing and online accounting services, you may find that Lili offers tremendous value for the money as one of the overall best banks for gig workers you can find.
Bluevine: Best for Business Interest Checking Account
Like Lili, Bluevine is a financial technology company. It is backed by Coastal Community Bank, Member FDIC to protect your deposits. The Bluevine business checking account offers 2.0% interest, which sets it apart from competitors.
To take advantage of the interest, you’ll need to either spend $500 per month with your Bluevine Business Debit Mastercard or receive $2,500 per month in customer payments to your Bluevine business checking account.
There are no monthly fees or minimum balance requirements and you can make unlimited transactions with no fees. Like Lili, Bluevine also offers other services for business owners.
If you are looking for a business interest checking account with value-added services, consider Bluevine. Your account integrates easily with QuickBooks, with no fees involved. Plus, you can set up sub-accounts to easily manage your money, add authorized users, and pay bills via ACH or wire transfer from your Bluevine account.
While many credit providers offer business credit cards, Bluevine is one of only a few business checking accounts that offers a business line of credit. You may qualify for a credit line of up to $250,000, with a rate as low as 6.2% interest. This interest rate is much lower than the national average of 20.46% for business credit cards right now, as reported by The Balance. Plus, you could get approved in as fast as five minutes, according to the Bluevine website.
For entrepreneurs seeking to purchase tools or resources, or freelancers in need of business equipment, Bluevine’s line of credit could provide you with the financial security you need to grow. Take note that you’ll need a credit score of 625 or more to qualify and $40,000 in monthly revenue. This is probably not a service for a gig worker, but for a seasoned entrepreneur.
Even so, it’s never too early to get started with a business checking account, especially one with no monthly fees.
Amex: Best for Debit Card Rewards and Bonus Offer
American Express is a renowned name in business and consumer rewards credit cards. But you might not be aware that the company also offers a business checking account with 1.30% APY on balances up to $500,000.
American Express also has no monthly maintenance fees, no fees on domestic ACH payments, and no fees at MoneyPass ATMs. The American Express Business Blueprint app makes it easy to manage your account.
Amex stays true to its credit card rewards roots with a rewards business debit card. Earn 1 Membership Reward point for every $2 on eligible purchases. You can combine points earned with Membership Rewards points accrued with other Amex cards, and use those points for travel, gift cards, or cash back. You can also convert those points into cash deposits directly into your new business checking account.
Amex’s bonus offer stands out to us. Earn 30,000 Membership Rewards points after you deposit $5,000 or more within the first 30 days of account opening, maintain that balance for the next 60 days, and make five or more qualifying transactions within those first 60 days.
NBKC Business Checking: Best for No Fees
If finding a business bank account with no fees is most important to you, a nbkc Business Checking account might fit the bill. The bank offers unlimited transactions with no fee, no minimum balance requirements, no monthly fees, and no opening deposit requirements either. You can also have out-of-network atm fees reimbursed for up to $12 per month.
If you are a freelancer just getting started or just looking to supplement your full-time income with a side hustle, you’ll find nbkc bank a low-cost and convenient option among free business checking accounts.
NBKC lacks some of the bells and whistles of the top choices on our list. You won’t get integrations with common business software or invoicing and accounting support. But a nbkc business checking account is free with your personal account and provides an easy way to keep your business and personal funds separate.
Novo: Best for Payment and P2P Money Transfer App Integration
Novo is another choice with no monthly maintenance fee, no monthly fee, free ACH transfers, and no minimum balance needed. Like many of the business bank accounts on this list, Novo is a financial technology company. It’s backed by Middlesex Savings bank, a Member FDIC, which means your money is protected up to $250,000 per account.
Novo is the best for business owners looking for an easy way to process payments or transfer funds. You’ll get free ACH transfers from another checking or savings account and refunds on all out-of-network ATM fees.
Novo integrates with many P2P payment apps, including Square, Shopify, and Stripe, as well as Etsy, eBay, Amazon and more.
When you use Novo Boost, you can get paid 95% faster through Stripe, or two business days before the funds would ordinarily appear in your account.
Plus, it’s quick and easy to open an account online, with approval as fast as 10 minutes – rather than days with some other online bank accounts.
Axos Bank: Best for New or Scaling Businesses
Many freelancers don’t think about opening a business account until they have incorporated their company to make that transition from self-employed to entrepreneur. If this sounds like you, Axos Bank could have the best bank accounts for you. The online bank is offering business owners who incorporated after June 2020 an extra $200 in their new business bank account.
If you aren’t newly incorporated, you can earn a $100 bonus.
Like many of the best business accounts on this list, Axos has no monthly fee, no minimum monthly average balance to hold, ATM fee reimbursements for all domestic transactions, and no minimum opening deposit. The bank accepts cash deposits or you can transfer money from other checking accounts via ACH.
Unlike many online banks, Axos offers business owners a dedicated relationship manager to help point you to the products and services that are best for your growing business.
Chase Business Complete Banking: Best for Credit Card Processing
As the largest U.S. bank, with assets of $3.31 trillion, Chase is a traditional bank that offers all the convenience of online banks. This includes personalized service, stellar fraud protection, and a host of other features and benefits we’ve come to expect from any financial institution.
The Chase Business Complete Banking account is ideal for entrepreneurs, offering unlimited transactions and no monthly fee (if you meet certain requirements). These requirements are relatively easy to meet with a $2,000 minimum balance, $2,000 in purchases on your Chase Ink Business credit card, a link to a Chase Private Client Checking account, or $2,000 in deposits from QuickAccept or Chase eligible merchant services.
The best aspect of Chase Business Complete Banking is the ability to process credit card transactions and receive funds the same day through Chase QuickAccept. (Additional fees apply.)
You can open an account with no minimum deposit to get started.
Wave Money Business Banking: Best for Free Business Banking
Wave Money integrates a free checking account with easy bookkeeping for freelancers and solopreneurs. Wave is best for those who want to improve cash flow with instant pay and want bookkeeping tools to make tax prep easier.
Wave has no monthly fee or transaction fees, so you keep more of what you earn. You can use the mobile check deposit feature for convenience, and make ACH transfers easily. There are no transaction limits with Wave, and you can also connect third party payment processors.
Wave is another fintech company, with banking provided by Community Federal Savings Bank, Member FDIC. That means your funds are insured for up to $250,000 per account.
TIAA Bank: Best for Business Investments
Besides checking accounts, TIAA Bank offers a variety of banking products for entrepreneurs and gig workers that sets it apart.
If you’re considering business savings accounts, TIAA offers CDs and money market accounts to earn interest at a rate higher than you may get with another account. Currently, TIAA’s one-year business CD offers an APY of 3.75%.
TIAA’s checking accounts offer easy online banking and mobile check deposit, along with personalized service from a business solutions specialist.
LendingClub Bank Tailored Checking: Best for Earning Checking Account Rewards
The LendingClub Bank tailored checking account for freelancers is one of the few banks on our list where you can earn interest on your checking balance, plus 1% cash back rewards when you use your debit card.
Account holders earn 1.5% APY on balances up to $100,000 and 0.10% APY on the portion of your balance that exceeds $100,000.
LendingClub Bank reimburses fees if you use an out-of-network ATM. The bank also supports QuickBooks, Quicken and Mint for budgeting and bookkeeping. You can also send digital invoices and get paid directly to your LendingClub account, making LendingClub Bank Tailored Checking one of the more robust and affordable online banks for freelancers.
Just make sure to maintain an average daily balance of at least $500 to have the monthly fee waived.
How to Choose the Best Bank Account for Your Business
When you’re evaluating business bank accounts, you’ll want to consider your needs and the features that are most important to you.
It should go without saying that you want an account with no monthly fees or no monthly fees. Unless you’re an established business owner, you may also want no minimum balance requirements. You don’t want to get saddled with fees if your business runs into cash flow problems or you have a down month.
If you run a high-volume business, look for a bank account with no transaction limits, no in-network ATM fees, and unlimited ATM fee rebates.
Need a way to manage contracts, collect invoices, and help with taxes?
Your business bank can represent much more than just a place to deposit cash and a means to pay your bills. Many of the best bank accounts on this list also offer freelancer invoicing, tax assistance, and ways to manage contracts.
Budgeting and Savings Features to Look For
When you’re a freelancer, it’s convenient to have an easy way to track your expenses and budget for not just expected costs, but surprise opportunities or financial emergencies.
Just as you should have a personal bank account established with emergency savings, you want a business savings account. In fact, you may want multiple business savings accounts or the ability to divide money into various buckets for known costs – like taxes – and unexpected expenses, such as car repairs or a new phone.
Some budgeting and savings features are nice to have, such as an interest-earning checking account and cash back on debit card purchases.
Why We Chose Lili as the Best Business Bank Account
Lili graces the top of our list because the fintech company offers so many value-added services for entrepreneurs that it’s virtually a one-stop shop for freelancers. However, the other banks on our list for best business accounts have their own benefits you might want to consider.
Should You Use Different Banks for Personal and Business Finance?
If you already have a separate bank account for your personal finance, there is something to be said for opening a business account through the same bank. You may get extra perks and benefits or waived fees. Best of all, it’s easier to use one app to manage all your personal and business banking.
But if you opt for an online financial services company, instead, it is typically easy to transfer funds between accounts. Also, companies like Lili and Bluevine specialize exclusive in business accounts, which means they have services tailored specifically to your needs.
Bottom Line
A lot of factors go into choosing the best bank account for your business checking needs. Knowing your must-haves, nice-t0-haves, and those features that don’t really matter to you can help make the decision easier.
FAQs
What is a business bank account?
A business bank account is a dedicated account separate from your personal accounts that you use to deposit cash, checks, or other customer payments earned through your business. You should also use your business checking account to pay for business expenses.
Do You Need a Business Bank Account if You’re a Freelancer?
Freelancers are not required by law to have a separate business banking account. But if your business is incorporated as an S-corp, C-corp, or LLC, you are required to keep your business and personal accounts separate.
Should You Have a Separate Bank Account If You’re a Freelancer?
Even though it’s not required by law, it’s a good idea to have an account separate from your personal checking account to help you keep track of business income and expenses.
What Makes a Business Bank Account Ideal for Freelancers?
Business bank accounts often have many of the same features as some of the best personal bank accounts. That would include low or no minimum balance requirements, no monthly maintenance fee, no transaction fees, and no hidden fees.
You may also look for features like mobile check deposit, unlimited electronic deposits, and low wire transfer fees if you have a lot of customers, clients, or vendors outside the U.S.
Methodology: How We Select the Best Bank Accounts for Freelancers and Side Hustlers
We evaluated the best bank accounts for freelancers based on the ability to earn interest, monthly maintenance fees, minimum balance requirements, the ease of making cash deposits, customer service, and more.
Some banks are better for freelancers who don’t maintain a high balance or only have a few transactions per month. Entrepreneurs with fast-growing businesses looking to scale may prefer a business checking account with unlimited transactions and the ability to accept credit card payments through the same bank.
Some business owners may want to be able to integrate their Quickbooks accounting system through their bank.
We have banks on this list designed for small business owners, freelancers and side hustlers at every stage of business growth.
Mortgage rates were near 7% last week but purchase applications were still able to pull out an 8% week-to-week gain. That was surprisingly strong, but as I have always stressed, context is critical. Purchase apps were coming off a four-week losing streak and even though those were mild week-to-week declines, it was still four weeks of weakness. The recent growth broke that streak, but demand is still low.
Active housing inventory grew while new listing data fell. Mortgage rates hardly budged last week, even with the Federal Reserve‘s announcement it was pausing rate hikes and CPI inflation reports.
Here’s a quick rundown of the last week:
Active inventory grew 8,041 weekly. I am still hoping for some weeks that show inventory growth between 11,000-16,000
Mortgage rates stayed in a tight range between 6.94%-6.98%
Purchase application data showed an 8% growth week to week
Purchase application data
Last week’s 8% week-to-week growth with rates near 7% was stronger than expected. But, last year we had the biggest waterfall collapse in purchase application data ever for a single year, and since Nov. 9, 2022, this data has been forming a bottom-end range.
This dynamic changed the housing market from one where home sales were crashing to one that is now stabilized. I explain how this happened in this recent podcast. As you can see in the chart below, the collapse of the purchase application data has stalled out, and if this didn’t happen, we would be having a different conversation about the housing market today.
Nov. 9 is a critical date because that’s when the housing market turned. Since that date, the purchase application data, after making some holiday adjustments, has had 18 positive and 11 negative prints. Year to date, we have had 11 positive and 11 negative prints.
The growth we saw from Nov. 9 to February was long enough to give us the only big existing home sales print we’ve had this year. In fact, after that, not much has been happening, so the sale ranges should stay between 4 million and 4.6 million this year. However, if we get more weakness in purchase apps, there is a chance that this data line goes below 4 million.
Existing home sales are coming up, but I don’t expect any big surprises in this week’s report. We cannot break over 4.6 million this year unless we get a long string of positive purchase application data, which would require lower mortgage rates. Last year, when mortgage rates fell from 7.37% to 5.99% for a few months, we had a string of positive purchase application data that facilitated that big home sales print. Imagine what the housing market would look like if rates stayed between 5.5%-6% for a year.
Weekly housing inventory
This year’s housing inventory theme has been a walking dead musical chorus of a zombie trying to escape a grave. Slow and steady and late! It took the longest time ever recorded in U.S. history to find the seasonal inventory bottom, which occurred on April 14, and it’s been a slow rise since then.
But, it’s still a rise! A normal housing market always has a spring inventory increase and then inventory fades in the fall and winter. While I wanted to see more inventory growth this year, I will take what I can.
Weekly inventory change (June 9-16): Inventory rose from 443,006 to 451,047
Same week last year (June 10-17): Inventory rose from 392,792 to 415,582
The inventory bottom for 2022 was 240,194
The peak for 2023 so far is 472,680
For context, active listings for this week in 2015 were 1,173,793
As you can see in the chart below, the inventory growth has been so slow that we are on the verge of showing some negative year-over-year inventory data. This happens with purchase application data being flat year to date. Of course, if we get some weakness in demand, then days on the market can grow and allow inventory to accumulate.
New listings data is another big story with housing inventory. Since the second half of 2022, it has been trending at all-time lows This trend has continued all year long, so we have limited new housing to work with.
Below are some numbers to compare the new listings data in recent years. As you can see, last year we were showing some year-over-year growth, but that’s not the case this year.
2023: 63,293
2022: 89,166
2021: 82,815
We only have a few weeks left before we will see the traditional new listings data decline and only a few months left before we see the traditional active listing supply decline. This week we will get the NAR existing home sales report, which will update that inventory data line, but total inventory levels are still historically low
NAR total Inventory levels:
Historically inventory is between 2-2.5 million
The peak in 2007 was a bit over 4 million
Currently we’re at 1.04 million
The 10-year yield and mortgage rates
We just had a surprisingly boring week with mortgage rates, considering we also had the CPI report and the Fed meeting. Not much happened last week with mortgage rates, as they stayed in a very tight range between 6.94%-6.98%.
However, the bond market had some exciting action that I should explain. First, the bond market didn’t react much to the CPI report; I wrote about the report itself here, which still shows the downtrend in the growth rate of inflation.
However, as I have noted in previous weekly tracker articles, we are having some tricky bond auction events since the debt ceiling action, which moved the markets last week. The market didn’t react too much to the Fed meeting, something I talked about on this podcast. With all those events happening last week, the chart below showed how the 10-year yield acted.
In my 2023 forecast, I wrote that if the economy stays firm, the 10-year yield range should be between 3.21% and 4.25%, equating tomortgage rates between 5.75% and 7.25%. As long as jobless claims trend below 323,000 on the four-week moving average., the labor market is staying firm, which means the economy is staying firm.
I have also stressed that the 10-year level between 3.37% and 3.42% would be hard to break lower. I call it the Gandalf line in the sand: “You shall not pass.” Yes, it might be corny, but I believed this level would be difficult to break under, and Gandalf had the right line for this bond market call.
So far in 2023, that line has held up, as the red line in the chart below shows. Mortgage rates have been in the range of 5.99%-7.14%. However, we do have some issues in the mortgage market.
Since the banking crisis started, the spreads between the 10-year yield and 30-year fixed mortgage rates have gotten worse, keeping mortgage rates higher than usual. As shown below, spreads made a noticeable turn when the banking crisis drama started and haven’t returned to the pre-drama trend. It will be a big positive for the housing market when this data line gets back to normal. However, until then, this has been a negative for the U.S. economy.
Another aspect of my 2023 forecast is that if jobless claims break over 323,000 on the four-week moving average, the 10-year yield could break under 3.21% and head toward 2.73%. Last week we didn’t have much movement here. However, as we can see below, the labor market, while still very healthy right now, isn’t as tight as it used to be.
From the St. Louis Fed: Initial claims for unemployment insurance benefits were little changed in the week ended June 10, at 262,000. The four-week moving average increased to 246,750
The week ahead: More housing data coming!
This week we have a series of housing data being released: Builder’s confidence, housing starts and the existing home sales report. Federal Reserve Chairmen Powell will also testify to Congress this week, which may produce fireworks. Of course, I am always mindful of the jobless claims data to see if we can spot more cracks in the labor market.
For housing starts, we want to see more completion of apartments because the best way to deal with inflation is always adding more supply, and we have a lot of 5 units under construction soon This is very key because without rent inflation taking off again, it’s impossible ever to have a repeat of the 1970s-style inflation.
So, let’s hope for some better housing completion data this week! The best news for mortgage rates is less inflation and the best way to deal with that is more supply.