Care homes operators have warned that a recent surge in mortgage rates and a delay to government reforms will sound a “death knell” for some UK providers.
The number of registered care homes fell to 12,224 on May 31 from 12,280 at the start of the year, according to data shared with the Financial Times by carehome.co.uk, a care home review site.
The rate of closures in England slowed in the first half of 2023, compared with the same period in 2022. However, a rise in mortgage rates threatens to increase the burdens on the care sector, compounding rising food and fuel prices and funding shortfalls.
“We are facing some extremely challenging times,” said Nadra Ahmed, chair of the National Care Association, a professional body. “There are vulnerable providers out there right now and there are a lot [of homes] that will be on the market.”
The challenges encountered by some operators would make their businesses “unviable”, she added, citing Pelham House in Kent as one of the latest to hit financial trouble. “Sadly they had to make the decision after 40 years to shut their doors,” she said.
“If you’ve got mortgages that’s going to have an impact on your ability to repay your borrowings.”
The Bank of England increased interest rates by 0.5 percentage points to 5 per cent in June in an effort to tame inflation, leading to rises in monthly mortgage repayments for borrowers on variable rates.
While interest rates are not expected to climb by as much as previously estimated following better than expected June inflation data last week, care providers are already feeling the heat.
Jay Dodhia, chief executive and co-founder of Serene Care, established with his wife Palvi, renovates and runs failing care homes. He said its model had been resilient but cautioned that rising interest rates could be particularly challenging for new builds.
“Most care homes are [on] variable rates — even when rates were very low it was very hard to get fixed rates on care home mortgages,” he said. “As the variable rate or the underlying BoE rate crept up, so have our interest payments.”
“Everything in isolation will affect you, if you put it all together — the rising inflation, utilities, food costs, staffing challenges . . . it could be a death knell for several [providers],” said Dodhia.
The number of councils in England reporting care home closures in their area rose to about 44 per cent at the end of May 2023, according to the Association of Directors of Adult Social Services, a charity.
Natasha Curry, deputy director of policy at the Nuffield Trust, said in 2019, before the coronavirus pandemic, the level was about a third.
“With borrowing rates also rocketing, it’s not a surprise that we’re seeing more closures of care homes and I think it’s inevitable that trend will continue,” said Curry.
During the Covid crisis, an injection of emergency government funding had helped to stabilise the market, cushioning the impact of falling occupancy rates. But that funding had ended.
Cathie Williams, joint chief executive of the Association of Directors of Adult Social Services, said councils had a duty to provide “continuity of care” for residents if a home closed.
But a decade of austerity, Brexit, the pandemic and staff shortages compounded by surging living costs had contributed to “a considerable lack of resilience” in the sector.
Where care places existed, “it tends to be because they’re in the wrong place or the wrong kind of care home or the quality is not good enough”, she added.
Health leaders warned of the effect of diminishing capacity in social care on the wider health system. Matthew Taylor, chief executive of the NHS Confederation which represents health organisations across the UK, said health leaders knew “all too well the impact that a lack of social and residential care has on the NHS”.
The support provided to residents in care homes could prevent avoidable hospital admissions. Moreover, a lack of available care home places for patients who could otherwise have been discharged from hospital could create “a log jam effect in A&Es with long ambulance waits”, Taylor added.
“The good news is we can see the rate of closures slowing in England and Wales although unfortunately Scotland has seen a rise,” said Richard Stebles, head of business intelligence at carehome.co.uk.
“In order to stay sustainable, we are likely to see care providers trying to attract more privately funded residents who pay higher fees than those funded by the local authority.”
Dodhia said the average fee for publicly funded social care bed should be £900 per week. But local authorities are often paying about £600 to £700 a week; some are willing to spend just £490 a week.
Care home operators had hoped for more funding from local authorities following a “cost of care exercise” that sought to generate a shared understanding of the cost of adult social care. But some councils struggled to increase payment and reforms were pushed back to October 2025.
Providers have also fought to access the £200mn earmarked for the NHS crisis plan, which aimed to move patients from hospitals to care homes.
A “winter discharge fund” had been announced, said Dodhia, but “local authorities didn’t really want to spend it”. He added: “They knew that as soon as that funding ran out then the residents would be left vulnerable, because they can’t continue to fund [the scheme].
“We heard about all these great support plans but we didn’t see any of it,” he said.
The Department of Health and Social Care said it was investing up to £7.5bn in social care over the next two years — “the biggest funding increase in history” — to boost capacity in social care, including £1.4bn that local authorities could use flexibly, including to pay social care providers more.
It added: “Despite the pressures the adult social care market faces, the number of adult social care locations registered with the Care Quality Commission has remained stable, and there are 6,600 more home care agencies in England now compared to 2010.”
The National Association of Mortgage Brokers (NAMB), an association representing the interests of individual mortgage loan originators and small to midsize mortgage businesses, is welcoming the introduction of a bill that would end the sale of trigger leads.
The bill, H.R. 2656, was introduced by Representative Richie Torres of New York on April 17, and would amend the Fair Credit Reporting Act to prohibit the creation and sale of trigger leads — which the association has been urging Congress to do since at least 2018.
This legislative proposal would deliver “long-needed relief” to consumers and the mortgage marketplace by ending the “dangerous practice” of trigger leads, Ernest Jones Jr., president of NAMB, said in a statement.
Trigger lead takes place when a consumer applies for a mortgage. The inquiry to credit by a mortgage company is a trigger that notifies the credit bureau that the consumer is interested in applying for financing. Then the trigger lead is then sold by the credit bureau – including Experian, TransUnion and Equifax – to data brokers, including competing mortgage companies, without the consumer’s knowledge or approval.
The leads consist of names, contact information and other data, including a significant amount of personal information, related to those who recently applied for a mortgage.
Consumers may then be contacted by competing companies who purchased the trigger leads, which often creates confusion for borrowers and may prompt them to send personal information they may not have intended to share with other lenders.
However, H.R. 2656 would ensure that no consumer reporting agency can provide a consumer report in connection with a credit transaction that is not initiated by a consumer.
At a time when interest rates and housing prices remain elevated, maximizing consumers’ choices can help people afford the right home for them, the Consumer Data Industry Association (CDIA) told HousingWire.
“Lenders making timely credit offers can maximize consumers’ choices when they need it most. When shopping for a mortgage this can mean saving thousands of dollars,” the CDIA said.
“NAMB is honored to have worked with members of Congress on this critical legislation and today we hope these efforts will help many people across the nation to end this terrible practice that places undue hardships on consumers, mortgage professionals and the entire marketplace,” Jones Jr. said.
It’s still early on in the process before it becomes a law, but this bill is a good start, the Mortgage Bankers Association (MBA) said.
“We will work with Congressman Torres and lawmakers from both sides of the aisle to stop unwanted harassment of consumers and maintain a well-functioning market, MBA’s Bill Killmer, SVP of legislative and political affairs, said.
Loan officers took to social media to support the “long overdue” legislative proposal.
“I can’t begin to tell you the number of times a client in processing calls one of my LO’s to question the bombardment of phone calls from ‘internet-call center’ sweat shops offering a much lower rate and faster closing… and within moments of their loan application,” a senior loan officer based in South Carolina, wrote on LinkedIn.
Another loan officer in California noted that clients get a lot more calls than before from competing lenders after a credit inquiry, causing confusion to consumers and making business a lot harder for LOs.
“It used to be that every once in a while a client would say they got a call soliciting them because of a recent credit inquiry but lately it’s gotten terrible and numerous times getting 15 calls in an hour. Often they represent themselves as someone the borrower is familiar with and quote outrageously low rates with a ton of points or try the old bait and switch,” the loan officer said.
HousingWire reached out to Equifax, TransUnion and Experian for comment. However, none of the three credit bureaus responded. This story will be updated and/or follow-up coverage will be added if the bureaus respond.
Disney World and Disneyland are some of the most well-known landmarks in the United States. Even if you’re not a fan of its animated films, Disney’s property runs the gamut from Marvel movies to the Star Wars universe.
You’ll find characters from many of Disney’s hits at the theme parks, though exactly what rides you’ll encounter and whom you’ll meet will vary depending on where you go.
Let’s look at Disneyland versus Disney World, including tickets, resorts, locations and attractions.
The main difference between Disneyland vs. Disney World is …
Disneyland comprises two theme parks and three hotels, while the Walt Disney World Resort complex includes four theme parks, two water parks, 31 hotels and a golf course.
Disneyland vs. Disney World location
Disneyland is in Anaheim, California. It’s 35 miles from Los Angeles International Airport (LAX), though traveling to the park can take a while because of traffic.
If you’re flying in, there are other airport options in the Los Angeles area, including:
John Wayne Airport (SNA).
Long Beach Airport (LGB).
Ontario International Airport (ONT).
Walt Disney World, meanwhile, is in Orlando, Florida. Its nearest airport is Orlando International Airport (MCO), which is about 16 miles away from the resort.
Disneyland vs. Disney World theme parks
Disneyland and Walt Disney World have two very different vibes, in part because of the theme parks each contains.
Disneyland Resort
Disneyland is the first theme park Walt Disney opened, doing so in 1955. Inside, the park features nine distinct lands, all of which include different theming and attractions:
Disneyland lands
Adventureland.
Critter Country.
Fantasyland.
Frontierland.
Main Street, U.S.A.
Mickey’s Toontown.
New Orleans Square.
Star Wars: Galaxy’s Edge.
Tomorrowland.
Disney California Adventure is the second theme park within the Disneyland Resort. Just across the walkway from Disneyland, this park is home to a more adult atmosphere than its sibling. You’ll find bigger rides, such as a looping roller coaster and a drop tower, as well as far more opportunities for purchasing alcohol.
Walt Disney World Resort
Walt Disney World debuted in 1971, roughly 16 years after Disneyland’s launch. Clear across the country, Disney World is far larger than Disneyland — and its four theme parks reflect this.
Magic Kingdom: Built similarly to Disneyland Park, Magic Kingdom offers a central hub ringed by different lands. These are much the same and include Fantasyland, Adventureland and Tomorrowland, among others.
Epcot: The second of Walt Disney World’s parks, Epcot focuses on two things: world culture and the future. This can be seen from rides such as Mission: Space, which simulates a trip to Mars. It can also be seen via the World Showcase, whose 11 pavilions highlight global food and culture.
Disney’s Hollywood Studios: With a focus on the movie and film aspects of Disney’s property, this park has attractions such as Mickey and Minnie’s Runaway Railway, Toy Story Land and Star Wars: Rise of the Resistance.
Disney’s Animal Kingdom: A wholly unique park in that it blends live attractions, such as a safari, with more standard fare like roller coasters.
Walt Disney World vs. Disneyland tickets
Disneyland and Walt Disney World tickets start at a similar price range: Disneyland’s tickets start at $104 for a one-day ticket, while Walt Disney World’s tickets begin at $109 per day.
However, Walt Disney World tickets will vary in price according to demand no matter what type of ticket you’re purchasing; this is true for single-day and multiday tickets. For example, a four-day ticket for a visit in late August will cost $485.
At Disneyland, multiday tickets are a fixed price. You’ll be able to visit anytime and pay the same cost, no matter how busy it is. A four-day ticket to visit Disneyland costs $395.
Both theme parks offer annual passes, though a Disneyland Magic Key pass is more costly than one for Walt Disney World. For 2023, a top-tier Inspire Key Pass for Disneyland will run $1,599 — and that pass still includes blockout dates.
Walt Disney World’s most expensive annual pass is the Disney Incredi-Pass, which costs $1,399 and allows you access to all of its parks every day of the year.
Walt Disney World vs. Disneyland resorts
The Walt Disney World and Disneyland resorts have their own hotels on property. However, Disneyland’s options are much more scarce than Walt Disney World’s. Within Disneyland, you’ll find just three options from which to choose, with price points that vary based on luxury.
At Walt Disney World, there are a whopping 31 on-site hotels. All of these feature incredible theming — such as overwater villas — and also run the gamut for pricing depending on where you stay.
Is Disneyland or Disney World better?
Which is better, Disneyland or Disney World? The one you prefer is going to come down to the type of vacation you enjoy. Because Disneyland is so much smaller, it’s easier to pack more into your day. This also means it’s possible to explore everything within the Disneyland Resort within a couple of days.
Walt Disney World has twice as many theme parks as Disneyland but also has other activities, which means that if you’d like to thoroughly explore the resort, it can easily take you more than a week to do so.
Walt Disney World and Disneyland feature theme parks with rides, characters and classic Disney favorites, but at their heart, they’re distinct. Before visiting either of these theme parks, you’ll want to do some research to see which is right for you.
Disneyland is smaller, features fewer theme parks and hotels and costs less than Walt Disney World. Walt Disney World is a sprawling complex that encompasses four theme parks, more than two dozen hotels and other attractions to boot.
(Top photo courtesy of Disneyland Resort)
How to maximize your rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2023, including those best for:
A 401(k) loan allows you to borrow money from your retirement savings and pay it back to yourself over time, with interest. While this type of loan can provide quick access to cash at a relatively low cost, it comes with some downsides. Read on to learn how 401(k) loans work, when it may be appropriate to borrow from your 401(k), and when you might want to consider an alternative source of funding.
What Is a 401(k) Loan & How Does It Work?
A 401(k) loan is a provision that allows participants in a 401(k) plan to borrow money from their own retirement savings. Here are some key points to understand about 401(k) loans.
Limits on How Much You Can Borrow
The Internal Revenue Service (IRS) sets limits on the maximum amount that can be borrowed from a 401(k) plan. Typically, you can borrow up to 50% of your account balance or $50,000, whichever is less, within a 12-month period.
Spousal Permission
Some plans require borrowers to get the signed consent of their spouse before a 401(k) loan can be approved.
You Repay the Loan With Interest
Unlike a withdrawal, a 401(k) loan requires repayment. Typically, you repay the loan (plus interest) via regular payroll deductions, over a specified period, usually five years. These payments go into your own 401(k) account.
Should You Borrow from Your 401(k)?
It depends. In some cases, getting a 401(k) can make sense, while in others, it may not. Here’s a closer look.
When to Consider a 401(k) Loan
• In an emergency If you’re facing a genuine financial emergency, such as medical expenses or imminent foreclosure, a 401(k) loan may provide a timely solution. It can help you address immediate needs without relying on more expensive forms of borrowing.
• You have expensive debt If you have high-interest credit card debt, borrowing from your 401(k) at a lower interest rate can potentially save you money and help you pay off your debt more efficiently.
When to Avoid a 401(k) Loan
• You want to preserve your long-term financial health Depending on the plan, you may not be able to contribute to your 401(k) for the duration of your loan. This can take away from your future financial security (you may also miss out on employee matches). In addition, money removed from your 401(k) will not be able to grow and will not benefit from the effects of compound interest.
• You may change jobs in the next several years If you anticipate leaving your current employer in the near future, taking a 401(k) loan can have adverse consequences. Unpaid loan balances may become due upon separation, leading to potential tax implications and penalties.
How Is a 401(k) Loan Different From an Early Withdrawal?
When you withdraw money from your 401(k), these distributions typically count as taxable income. And, if you’re under the age of 59½, you typically also have to pay a 10% penalty on the amount withdrawn.
You may be able to avoid a withdrawal penalty, if you have a heavy and immediate financial need, such as:
• Medical care expenses for you, your spouse, or children
• Costs directly related to the purchase of your principal residence (excluding mortgage payments).
• College tuition and related educational fees for the next 12 months for you, your spouse, or children.
• Payments necessary to prevent eviction from your home or foreclosure
• Funeral expenses
• Certain expenses to repair damage to your principal residence
While the above scenarios can help you avoid a penalty, income taxes will still be due on the withdrawal. Also keep in mind that an early withdrawal involves permanently taking funds out of your retirement account, depleting your nest egg.
With a 401(k) loan, on the other hand, you borrow money from your retirement account and are obligated to repay it over a specified period. The loan, plus interest, is returned to your 401(k) account. During the term of the loan, however, the money you borrow won’t enjoy any growth.
Recommended: Can I Use My 401(k) to Buy a House?
Pros and Cons of Borrowing From Your 401(k)
Given the potential long-term cost of borrowing money from a bank — or taking out a high-interest payday loan or credit card advance — borrowing from your 401(k) can offer some real advantages. Just be sure to weigh the pros against the cons.
Pros
• Efficiency You can often obtain the funds you need more quickly when you borrow from your 401(k) versus other types of loans.
• No credit check There is no credit check or other underwriting process to qualify you as a borrower because you’re withdrawing your own money. Also, the loan is not listed on your credit report, so your credit won’t take a hit if you default.
• Low fees Typically, the cost to borrow money from your 401(k) is limited to a small loan origination fee. There are no early repayment penalties if you pay off the loan early.
• You pay interest to yourself With a 401(k) loan, you repay yourself, so interest is not lost to a lender.
Cons
• Borrowing limits Typically, you are only able to borrow up to 50% of your vested account balance or $50,000 — whichever is less.
• Loss of growth When you borrow from your 401(k), you specify the investment account(s) from which you want to borrow money, and those investments are liquidated for the duration of the loan. Therefore, you lose any positive earnings that would have been produced by those investments for the duration of the loan.
• Default penalties If you don’t or can’t repay the money you borrowed on time, the remaining balance would be treated as a 401(k) disbursement under IRS rules. This means you’ll owe taxes on the balance and, if you’re younger than 59 1 ⁄ 2, you will likely also have to pay a 10% penalty.
• Leaving your job If you leave your current job, you may have to repay your loan in full in a very short time frame. If you’re unable to do that, you will face the default penalties outlined above.
Alternatives to Borrowing From Your 401(k)
Because withdrawing or borrowing from your 401(k) comes with some drawbacks, here’s a look at some other ways to access cash for a large or emergency expense.
Emergency fund Establishing and maintaining an emergency fund (ideally, with at least three to six months’ worth of living expenses) can provide a financial safety net for unexpected expenses. Having a dedicated fund can reduce the need to tap into your retirement savings.
Home equity loans or lines of credit If you own a home, leveraging the equity through a home equity loan or line of credit can provide a cost-effective method of accessing extra cash. Just keep in mind that these loans are secured by your home — should you run into trouble repaying the loan, you could potentially lose your home.
Negotiating with creditors In cases of financial hardship, it can be worth reaching out to your creditors and explaining your situation. They might be willing to reduce your interest rates, offer a payment plan, or find another way to make your debt more manageable.
Personal Loans Personal loans are available from online lenders, local banks and credit unions and can be used for virtually any purpose. These loans are typically unsecured (meaning no collateral is required) and come with fixed interest rates and set terms. Depending on your lender, you may be able to get funding within a day or so.
The Takeaway
Borrowing from your 401(k) can provide short-term financial relief but there are some downsides to consider, such as borrowing limits, loss of growth, and penalties for defaulting. It’s a good idea to carefully weigh the pros and cons before you take out a 401(k) loan. You may also want to consider alternatives, such as using non-retirement savings, taking out a home equity loan or line of credit, or getting a personal loan.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Alaska Airlines is growing its international presence, adding a new country to its route map as part of a broader three-route expansion.
The airline’s newest destination: Guatemala.
Daily year-round service from Alaska’s hub in Los Angeles will launch Dec. 14.
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Alaska also will add two new seasonal routes to Zihuatanejo along Mexico’s Pacific coast. Beginning Dec. 23, the carrier will offer one weekly flight from both San Diego and Chicago through April 6.
The latest additions come as Alaska has been building its international profile.
Guatemala will become Alaska’s sixth country served outside the U.S. The carrier also flies to destinations in Belize, Canada, Costa Rica, Mexico and, announced just last month, the Bahamas.
Related: Turf war: United puts biggest jet on new San Diego flight after Alaska unveils new route
Alaska touted its growing international ambitions in its latest expansion.
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“As the fifth largest carrier in the U.S., we’re a growing airline that’s expanding to more international destinations,” Kirsten Amrine, Alaska’s network planning chief, said in a statement. “Our new service will allow families, friends and businesses to better connect between the West Coast and Central America.”
Aside from the addition of a new country, Alaska’s decision to fly nonstop between Zihuatanejo and Chicago is an interesting one. Alaska already flies to Zihuatanejo from its hubs in San Francisco and Los Angeles. San Diego is a focus city for the carrier.
Bargain mode: How to save hundreds on flights with the Alaska Airlines Companion Fare
Unlike those other cities, Chicago is neither a hub nor a focus city for Alaska. That means its Zihuatanejo route — Alaska’s first and only international route from the Windy City — will have to succeed without getting a boost from connecting passengers.
Also unlike Alaska’s California bases, Alaska’s presence in Chicago is small, meaning the airline might not be top of mind for customers looking for flights to the city along Mexico’s central Pacific coast.
Still, Alaska will get some help on its Chicago-Zihuatanejo service. The airline notes it’s being offered “in partnership with ALG Vacations,” a travel company that will fill seats on Alaska’s service as it sells vacation packages between Chicago and the Mexican beach destination.
“Our new Saturday nonstops to Zihuatanejo from San Diego and Chicago add to our current Los Angeles and San Francisco service and provide guests with more choices as they plan their winter getaways,” Amrine added in Alaska’s statement.
The government is back in business and mortgage rates are moving a littler lower today. We’re about to get three straight days with important economic reports out, though, which could put some upward pressure on rates. If you’re considering locking in a rate on a purchase or refinance, we think you should take advantage of today’s low rates and act now. Read on for more details.
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Market Outlook 1.22.18 from Total Mortgage on Vimeo.
Where are mortgage rates going?
Rates move lower
President Trump signed a bill yesterday which put temporary funding into effect for the government through February 8th.
Click here to get today’s latest mortgage rates (Jul. 24, 2023).
We saw all of the major U.S. stock indexes bump higher after the news broke around midday, but the decision didn’t have much of an immediate effect on the bond and mortgage markets.
However, today we’re seeing Treasury yields move lower, with the yield on the 10-year Treasury note (the best market indicator of where mortgage rates are going) down about 2.5 basis points.
Mortgage rates typically move in the same direction as the 10-year yield, so we’re looking at some downward pressure on rates today.
Looking ahead to the rest of the week, we have several economic reports out every day that could influence the direction of rates.
The two most notable events, however, are the Durable Goods report and the first estimate for fourth quarter GDP, both scheduled to be released early Friday morning.
If we get some strong readings in those reports, we could definitely see mortgage rates move higher as we head into the weekend.
Rate/Float Recommendation
Lock now while rates are low
Mortgage rates are still at very low levels on a historical perspective. However, current mortgage rates are expected to rise over the long-term, so we do firmly believe that it’s in the best interest for most borrowers to lock in a rate sooner rather than later.
Click here to head to our Mortgage Builder and figure out how much you could save.
Today’s economic data:
Richmond Fed Manufacturing Index
The Richmond Fed Manufacturing Index hit a 14 for January. That’s outside of the lower end of the consensus range.
Fedspeak
Chicago Fed President Charles Evans will speak at 6:30pm.
Get the GreenLight and close in 21 days*
Notable events this week:
Monday:
Chicago Fed National Activity Index
Tuesday:
Richmond Fed Manufacturing Index
Fedspeak
Wednesday:
FHFA House Price Index
PMI Composite Flash
Existing Home Sales
EIA Petroleum Status Report
Thursday:
International Trade in Goods
Jobless Claims
New Home Sales
Kansas City Fed Manufacturing Index
Friday:
Durable Goods Orders
GDP
*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.
Mortgage applications dropped again, falling 0.9% from the previous week, according to the latest report from the Mortgage Bankers Association for the week ending April 30, 2021.
MBA’s Associate Vice President of Economic and Industry Forecasting Joel Kan called last week’s mortgage activity “a mixed bag,” between rates, loan sizes, and government purchase applications.
“Mortgage rates were slightly higher, refinance applications were essentially unchanged, and purchase applications fell for the second straight week,” Kan said. “Both conventional and government purchase applications declined, but average loan sizes increased for each loan type. This is a sign that the competitive purchase market, driven by low housing inventory and high demand, is pushing prices higher and weighing down on activity. The higher prices are also affecting the mix of activity, with stronger growth in purchase loans with larger-than-average balances.”
The refinance index increased 0.1% after weeks of decreases. The seasonally adjusted purchase index decreased 3% from one week earlier, and the unadjusted purchase index was down 2% compared with the previous week — but was still 24% higher than the same week one year ago.
It’s important to note, Kan said, that mortgage application numbers from this time last year reflect challenges brought on by the pandemic.
“The 30-year fixed rate was up slightly to 3.18%, which is still 22 basis points lower than a year ago, but higher than it was between mid-2020 and February 2021,” he said.
The refinance share of activity increased to 61% of total mortgage applications from 60.6% the previous week.
The FHA share of total mortgage applications decreased to 10.1% from 10.7% the week prior. The VA share of total applications also decreased, from 12.2% to 11.9%
Here is a more detailed breakdown of this week’s mortgage application data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18% from 3.17%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.31% from 3.28%
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.13% from 3.12%
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.54% from 2.55%
The average contract interest rate for 5/1 ARMs increased to 2.76% from 2.59%
Mortgage rates topped 7 percent this week, the highest level in 20 years — and the latest sign that the Federal Reserve’s aggressive moves to slow the broader economy are hitting the housing market hard already.
The average rate for a 30-year fixed mortgage, the most popular home-loan product, reached 7.08 percent, according to data released Thursday by Freddie Mac. The last time mortgage rates climbed so high was April 2002, and they are slated to keep climbing as the Fedmoves swiftly to tame a red-hot housing market,a key step in lowering rent costs and ultimately quelling inflation in the broader economy.
The central bank doesn’t directly set mortgage costs, but changes inits policy rate — known as the federal funds rate — ripple through the economy and influence all kinds of lending. Since March, the Fed has raised rates five times, bringing its benchmark rate from near zero to between 3 percent and 3.25 percent. The central bank is expected to raise rates by another 0.75 percentage points next week.
Calculate how much more mortgages will cost as interest rates rise
Those moves have already triggered major consequences for the housing market, and the spike in mortgage rates has prompted somebroader concerns that the Fed is pumping the brakes on the economy with far too much force.
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“People can say, ‘Well, you know, a percent [added] on the mortgage rate is still low.’ But we’ve had several percents on the mortgage rate in a short period of time,” said Diane Swonk, chief economist at KPMG. “The rapid pace at which they’re raising rates are, in and of themselves, destabilizing.”
The average mortgage rate has gone up dizzyingly fast. A year ago, it was 3.09 percent; even as late as March, the average rate for a 30-year fixed mortgage was below 4 percent. The increase from 3.22 percent in January to 7.08percent now, a jump of 3.86 percentage points, is the steepest increase rates have gone through in a year. The previous record was 3.59 percentage points in 1981.
Prices rose again in September, ensuring more interest rate hikes
For much of the pandemic, low rates meant aspiring home buyers flooded into the market, competed for the few homes available and sent prices soaring. But now, wary of shelling out hundreds of dollars more per month on a mortgage, buyers are bowing out, boosting the supply of available homes and helping prices go down overall. This year, when rates were below 4 percent, a family earning the median household income of $71,000 could afford a $448,700 home with a 20 percent down payment. This week, with rates around 7 percent, they could only afford a $339,200 home, according to Realtor.com.
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Home prices are falling at a record pace. The Case-Shiller home price index released earlier this week showed prices were 13 percent higher in August than they were a year ago, down from 15.6 percent higher the previous month. The 2.6 percentage point difference between those two months is the largest decline in the history of the index, which debuted in 1987.
Zillow on Wednesday announced it had laid off 300 workers across several departments, including home loans and closing services, though the company said it is not under a hiring freeze.
Demand for mortgages has also plummeted as quickly as rates have spiked. Total application volume is at its lowest level since 1997, according to the Mortgage Bankers Association. Refinances are down 86 percent from where they were a year ago, and mortgage lenders nationwide, including at major banks, have let employees go as the market slows.And rising rates have boosted interest in adjustable-rate mortgages. The ARM share of applications was at 12.7 percent.
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Home builders are also being pinched. Overall housing starts fell 8.1 percent to a seasonally adjusted annual rate of 1.44 million units in September, according to a report earlier this month from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. So far this year,single-family starts are down 5.6 percent compared to this point last year.
Builder confidence also fell for the 10th month in a row in October, dropping to its lowest level since 2012, excluding the two-month period in spring 2020as the pandemic began. It is half the level it was six months ago.
“This will be the first year since 2011 to see a decline for single-family starts,” Robert Dietz, National Association of Home Builders chief economist, said in a statement. “And given expectations for ongoing elevated interest rates due to actions by the Federal Reserve, 2023 is forecast to see additional single-family building declines as the housing contraction continues.”
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Still, the Fed’s tools are limited, and officials routinely point to the housing market as one of the clearest signs that their rate hikes are having the intended effect.
“We are starting to see some adjustment to excess demand in interest-sensitive sectors like housing,” Fed Governor Christopher Waller said in a speech this month. “But more needs to be done to bring inflation down meaningfully and persistently.”
Whenor how the Fed’s rate hikes rates will overtake inflation elsewhere in the economy is not yet clear. Rate hikes are designed to snuff out demand, but they do nothing to fix supply-side issues, like shortages of oil and gas, affordable apartments or chips for new cars. Overall, consumer prices remain stubbornly high, rising 8.2 percent in September, compared with the year before.
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Rent costs also are up 7.2 percent in the past year, and rentsrose 0.8 percent from August to September. Goldman Sachs has forecast that overall shelter inflation will peak at 7.5 percent next spring before slowly decelerating to just under 6 percent at the end of 2023. That has major implications for Fed policy, since housing costs makes up a huge portion of the basket of goods used to measure inflation in the economy.
As the Fed fights inflation, worries rise that it’s overcorrecting
But the slowing housing market may also be finally cooling rental prices, too. National rent growth sank to its lowest annual pace (7.8 percent) since June 2021, according to Realtor.com. The U.S. median rental price recorded its second month-over-month decline in eight months in September.
The rise in mortgage rates is slowing down the market even in places where it was red-hot during the pandemic.Through 2020 and 2021, sales prices exploded in the Hudson Valley, as transplants from New York City and elsewhere clamored for the few homes available. But as mortgage rates soar now, the number of homes available has more than doubled in the last three months, jumping from around 150 units to about 380, said Ryan Basten, an associate broker at Berkshire Hathaway HomeServices Nutshell Realty.
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That’s an encouraging sign that the market is returning to some version of normal. But Basten said there’s plenty of uncertainty about the future. He ticked through the recent jumps in mortgage rates: 5 percent “wasn’t too bad,” he said, and 6percent was “workable.” But with the Fed poised to hike rates two more times before the end of the year, Basten said he and others in the industry are left “wondering if there is going to be a real downturn in the market.”
“We can only deal with what we’re dealing with now. I can’t see that mortgage rates are going to go to 10 [percent]. If they did, then that would feel like a recession,” Basten said. “Eight [percent] feels bad. Ten percent would be like, ‘Wow, where we do go from here?’ ”
The practical side of me loves wedding registries, and the values-driven side of me has grown to loathe them as brides and grooms seem ever bossier. Registries are nothing new, of course. We registered for gifts in 1973, and as a result received two lovely sets of china and ten place-settings of silver. Beyond that, it was open season: we received all sorts of gifts we had not designated. Most we used, a few we actively hated, and many we came to appreciate and even love over time. (Regifting hadn’t been “invented” back then.). From the point of view of the brides and grooms, wedding registries have many upsides. But let’s look at it from the perspective of the gift-giver.
Pros and Cons
The pros of a gift registry are:
Efficiency. You can order the gift and you’re done. The store ships it and you don’t have to wrap it, schlep it, or even buy a card.
The couple picks what they want, and you know your gift is to their taste, which is especially helpful if you hate shopping or don’t know the couple well enough to key in to their life style. Easy. Done.
From my point of view, the negative list is more extensive:
It’s impersonal. No way to write a note to go with your gift, except electronically.
The choices are not prioritized. Recently, after scrolling through scores of chosen items, I finally decided to just purchase a gift certificate from the registry and let the couple decide. Wrapping and shipping would have been an extra $20, which seems mostly wasted.
The options are overly directed. The attitude expressed, even if it’s not intentional, is DON’T EVEN THINK ABOUT GIVING US SOMETHING NOT ON OUR LIST! I find it arrogant that young couples think they know more about what they will need over a lifetime than people who have actually lived a generation or two longer. This is often the case because the couple is using a store registry, which is a fixed template without options to comment or personalize any aspect of the choices. They come off sounding very dictatorial.
I don’t like being limited to chain stores and/or mass produced items. Some of my favorite wedding gifts are pottery and other handmade crafts, which cannot be purchased from a registry. It’s also nice to give a family heirloom or something more personal.
I still might very well decide to give them a place setting of something they’ve chosen, or whatever, but as a sport PSAWSWLD [J.D.’s note: Yeah, I had to click that link, too.], I could probably find it cheaper elsewhere online, and/or perhaps using Amazon Prime’s free shipping, thereby giving them a more valuable gift.
I am often turned off by the actual items chosen since they are way pricier and extravagant than anything I have ever owned. (And I’ve lived a perfectly abundant life!) I like to feel simpatico with the gift I’m giving, since it’s an expression of my values.
I dislike not knowing whether our gift arrived, since brides and grooms (or bride + bride and groom + groom) are often really terrible about writing thank-yous. My preference is to bring the gift with me to the wedding, if I am attending. Not an option with a registry — the whole point is to ship the gift directly to the couple. They haven’t added return receipts for the giver, so far as I know, so if you never receive an acknowledgment, you don’t know if it’s just another inconsiderate bride and groom screwing up, or if your gift didn’t arrive, and they think you are a creep.
The old-fashioned side of me feels uncomfortable with the couple knowing precisely, down to the dime, what I spent on their gift. It feels so calculated. I mean, why don’t they just send a bill?!
Other Options
A few brides and grooms I know have worked to transcend the tax-assessment feel of store registries. While they feel obliged to include conventional stores on their wedding sites (because that’s what lots of their guests do prefer), they expand their suggestions, including favorite charities and causes. One couple said they would love gift certificates to local bookstores and garden shops and described their garden, giving their guests a sense of their values and passions. A few years ago we gave a giant composter to this couple, since they had included it on a wishlist, and it really spoke to me; I totally enjoyed sending it to them. The fancy china comes out maybe once a year, but that composter is used every day!
Another way some couples counteract the gimmes is to ask for non-material gifts. Recently all the invitees to a wedding we attended were asked by the bride’s friend to submit a favorite recipe, which they made into a cookbook for the bride and groom. Another woman I know did something similar for her future daughter-in-law, collecting recipes from all the immediate family, including copies of recipes written by grandmothers no longer alive. (She made copies for all the contributors, and I’m sure they are treasured!)
A nice custom in the Jewish community is to send close friends and family fabric squares to decorate, which are then sent back and stitched together to create the wedding canopy. None of these touches are instead of a material gift, but they serve to make guests feel like they are more than ATMs.
Some couples create an online donation registry in lieu of gifts, but the site notifies the couple of the amount of each contribution, something which makes some people (like me, for example!) uncomfortable. I recently received a link to New American Dream’s registry where the celebrants (brides and grooms, new parents, etc) can set up a registry asking for whatever they like, mixing purchased and guest-created items. Their sample asks for recipes, food for potluck weddings, advice, and fair-traded household things. Very nice idea for a small, simple event, but for a conventional, fancy wedding, I think it would freak people out. (It would be a nice additional alternative to a conventional registry, though; a couple could do both, and explain their thinking on their wedding website, the new de rigeur system for communicating wedding plans.)
And what about the most obvious wedding gift? Cold cash, of course. It’s nice to receive, but I can tell you, 33 years later, it’s the beautiful, thoughtful items which I enjoy, the cash long ago having been plowed into aggregate savings. Many of the brides and grooms I know are mature and earn more than I do, so in those cases money feels like a weird gift. (If the couple is a pair of starving students, money is still a great idea, perhaps along with a smaller material item.)
Let’s hear what you all think about wedding registries, pro or con, and from both givers and receivers’ points of view. Are they a necessary evil, a godsend, or something in between?
Teutsch previously told GRS readers about the pros and cons of working at home and discussed how to get a grip on consumerism.
As with many things in life these days, it all started with an episode of the Peter Attia podcast.
In this edition, our nation’s most Badass Doctor was interviewing a guest I initially dismissed as not overly applicable to my own lifestyle. A young,excessively handsome dude who happened to be a writer with a new book out. But the headline of the episode was just intriguing enough to get me to click.
“The Comfort Crisis”
Wow, what an amazing turn of phrase, and what a concise summary of the core of this whole Mustachianism thing I’ve been trying to express for the past dozen years.
While the news headlines cry constantly about our nationwide personal debt crisis or health crisis or any other number of things that suggest that life is so hard these days, I have always seen the opposite: on average, we Americans seem to have a problem of ridiculous overindulgence and easiness in our lives, and our main problem is not recognizing it, and the damage it does to us.
So of course I had to click, and then listen to the whole two hour episode, and then buy the book, and then spend the past month reading and digesting it in small, meaningful chunks like the modern-day chunk of scripture-like wisdom that it is. And wow, am I glad I did so.
The author is Michael Easter, a former writer for Men’s Health magazine was also once catastrophically addicted to alcohol – and descended from a long family line of ancestors with the same affliction.
He was lucky to catch himself from that fall in time to save his own life, and that story alone makes the book worth reading as someone who has stood by helplessly as loved ones battled with addiction. But I think his history with overindulgence in the hollow comforts of alcohol also gives him an edge on writing about the battle between comfort and hardship on the bigger stage of life in general.
So what is The Comfort Crisis about, and how can it make all of our lives better?
The best part about this book is just what a damned good writer this Easter guy is. Like many of the most fun popular science books*, it follows a split narrative which jumps back and forth to interweave the story of an insanely difficult caribou hunting trip he joined in a remote pocket of Alaska, with the appropriate bits of science, psychology and cultural commentary that help us explain and learn from each chapter of the epic shit he had just endured. This allows us to process and apply the lessons in our own lives.
For example, have you ever wondered why the type of bored, rich suburbanites who populate the board of your local Homeowner Association and whine about unacceptably tall weeds or unauthorized skateboarding on Nextdoor are so insufferable?
Why can’t they do something better with their time?
It turns out that there’s a scientific explanation for these unfortunate people, along with most of our other problems:
The tendency of humans to always scan our environment for problems, regardless of how safe and perfect that environment is.
The book cited a study in which researchers told people to look for danger, in an environment which gradually became safer and safer:
“When they ran out of stuff to find they would start looking for a wider range of stuff, even if this was not conscious or intentional, because their job was to look for threats.”
“With that in mind, Levari recently conducted a series of studies to find out if the human brain searches for problems even when problems become infrequent or don’t exist.“
“As we experience fewer problems, we don’t become more satisfied. We just lower our threshold for what we consider a problem.“
In other words, even when our lives are virtually problem free, instead of appreciating our good fortune we just start making up shit that we can complain about instead.
And then our politicians cock their greasy, finely-tuned ears in our direction and make up policies to appease our mostly-insubstantial concerns. And they invent their own trivial “wedge” issues to get us to all bicker about our different cultures and religions, suddenly caring about things that would not have even been problems if nobody told us they were.
And there’s America’s weakness in a nutshell, and meanwhile our strength comes entirely from the times we choose not to waste our time stooping to this level.
Meanwhile, the opposite effect holds true: people who survive in rougher environments than us end up more resilient and less prone to complaining.
In a series of recent interviews, Ukrainian people living in the war zones of their occupied country were asked “is it safe to live where you live?” and a strangely high percentage still said “Yes” – not all that different from the responses of US residents when asked the same question about their own cities.
This adaptation principle also explains why some first generation immigrants tend to build businesses and wealth while their own offspring in second and third generations are more likely to become complacent and spend it down. As an immigrant myself, I can see why this is: conditions were just slightly more harsh and less comfortable and wealthy where I grew up, so I adapted to those conditions as “normal” which made the United States seem posh and easy by comparison. Which made it easier to spend less money and accumulate more.
Tree Therapy
The trap of pointless worry is just one of the many revelations of The Comfort Crisis. It also gives insightful explanations for why spending time in Nature boosts our mental and physical health, while cubicles and car driving grind us down.
There’s something in our biological wiring that responds instantly and powerfully to everything natural, in ways that you can’t get anywhere else.
Even placing a single plant into a hospital room will measurably improve the recovery of almost all patients from almost all ailments. So can you imagine the power of the medicine you are inhaling if you step into a real, living forest? And what if you spent several hours there, or even several days?
Later, we get lessons on our human adaptation towards the ratio of effort to reward:
It’s proven the harder you work for something, the happier you’ll be about it,”
And our bizarre natural aversion to physical exertion:
A figure that shows just how predisposed humans are to default to comfort:
2 (two).
That’s the percent of people who take the stairs when they also have the option to take an escalator.
Which is remarkable, given the absolutely insane cost this tendency imposes upon us.
Moving your body, even a bit, has enormous benefits – again to almost all people towards reducing the probability and severity of almost all diseases. So can you imagine the benefit of moving your body for several hours per day in a natural environment, and including heavy load bearing and bits of extreme exertion?
These things are not speculative pieces of alternative medicine. They are known, easily and reproducibly tested, and proven to be the most effective things we can possibly do with our time.
So why, the actual fuck, are people still sitting inside, watching Netflix, driving to work, and then driving to the doctor’s office to get deeper and deeper analysis of a neverending series of exotic and mysterious and unsolvable problems with their physical and mental health?
We should at least start with the stuff we know is essential – maximum outdoor time every day, heavy exertion including with weights, minimal time spent sitting and driving, and minimum junk food, sugar, and alcohol. You definitely don’t have to be perfect, but just understand that these are the big levers for physical and mental health.
Only then, once you reach these minimum basic things for human survival, should you expect that more exotic and niche medicines and treatments are the only course of action.
By all means, follow your doctor’s orders and don’t just dump all of your medications down the sink because of this MMM rant. But at the same time, realize that the stuff that is hard and uncomfortable is very likely to be the stuff that improves your life the most.
It’s all the stuff that Mr. Money Mustache has been telling you since 2012, but with more detail and less distraction. This book is a concentrated packet of advice for solid living.
Real Life Inspiration from the Good Book
In a happy coincidence, I happened to be in the middle of some hard stuff** of my own as I worked my way through The Comfort Crisis and I found the perspective quite useful and transformative to apply hot off the press.
Normally somewhat of a homebody, I had embarked on a solo journey for some Carpentourism deep in the mountains of Southwestern Colorado. I had my whole life shrunk down into the new Model Y including food, bed, and the necessary tools and materials to tackle a pretty long laundry list of tasks on two different construction projects (fixing up a mini-resort property in Salida, and starting construction on a small cabin in Durango)
The trip immediately took a turn towards the dramatic as I climbed into the mountains and drove straight into the most torrential rainstorm I have ever seen, then accidentally broke a traffic law in a remote mountain town right in front of both of the local police officers ($115 fine and two points off my license), then five minutes after that had a small pebble hit my brand-new windshield which instantly spread into a crack that spans the whole thing, all before finally limping into Salida to unpack and get started on the work.
“Big deal”, I can already hear you saying, “Retired man experiences two minor incidents while taking a vacation in his luxury car.”
And you’re right, and that is exactly my point.
My life is so stable and comfortable that even these two miniature challenges threw me off balance, and I arrived in a slightly bummed and stressed-out state. But I still knew that in the bigger picture, they are good for me if I accept them as I accept them as the lessons they are rather than choosing to continue to worry about them.
As the trip went on, more things happened, almost as if The Comfort Crisis book were trying to prove a point. I drove three hours deeper into the mountains and up the steep dirt road to arrive at my second friend’s piece of land – a plot of forest in the mountains just outside of Durango.
My work days in that high desert environment in the peak of summer were hot and physically demanding. It was hard to keep my tools, and my food supply in the cooler, and myself protected from the scorching sun (and a strange neverending blizzard of tree pollen) while still getting the job done. There was no indoor plumbing and we had to be very careful with our limited water supply. And then at the end of each day I had to reshuffle everything and set my car back up as a bedroom and crawl in for the night. Alone and far from home.
But instead of feeling depressed as I experienced this constant hardship, the opposite thing was happening: I felt more alive and more badass with each passing day. I got better at being a feral forest man.
One day, my co-builder and I decided to take the afternoon off and head to the wild, remote Lemon Reservoir for some paddleboarding. We didn’t bring our phones or any other conveniences or amenities – just two boards and the minimal clothing required for swimming. And we headed out into a stiff headwind and little whitecap waves, laughing at the freedom of the experience.
It was hard, and slightly scary, as we got further and further from the shore. Progress was slow even with serious paddling, and we didn’t have any particular plan beyond the spirit of “let’s GO!”
But again Michael Easter was there whispering in my ear, saying,
“Is this difficult, Mustache? GOOOOoood! Then you’d better keep going!”
So we did. And we got way out into that lake, to a point where the water was shielded from the wind by the mountains on the other side. And it was awesome.
We cruised over to the shore to explore a particularly scenic meadow, coated with the softest green mossy grass and exuberantly colored wildflowers, and set at an impossibly steep angle. And damn I wished that I could have taken pictures, but in a strange way this forced me to burn that spot more thoroughly into my memories using my own senses instead.
Then we headed back out into the center of the lake, set down the paddles, and just laid down on our boards to let the wind and the waves take us back towards the far end of the lake where we had started. And what a strange, serene feeling it was, floating on just a tube of air over two hundred feet of cold blue water, feeling like a jungle man with no cares and no plans and no material possessions. It could have been scary, but instead it was one of the best and most relaxed moments of my life.
Eventually, this week of forest living and exertion had to come to an end so I could get back to my own town to be a Dad again. But it ended with a final reminder of the principles of the Comfort Crisis – after so many days relatively extreme work and a relatively sparse food supply, I had grown used to a healthy background hunger. Which is yet another thing that we are meant to experience as humans – being satisfied and free from hunger all the time is neither normal nor healthy.
But when my hosts took me out on the town for a final night thank you dinner at the Mexican restaurant, the immense Burrito platter I consumed turned out to be the most delicious meal of my life.
Purposeful Hardship vs. Purposeful Spending
There has been a lot of talk directed at the FIRE community recently about how bad we are at spending our money, and how we all need to loosen up. And there’s a small amount of truth to it, as my local friends Carl and Mindy recently admitted during a grilling on the Ramit Sethi podcast.
But we also need to keep this whole idea of excessive comfort in mind, and the damage it does to the natural human condition.
It’s great to spend money on adventures and improving yourself, being generous to others, and making the world a better place.
But it’s also way too easy to fool yourself into thinking you “want” things that just make your life easier and easier.
So your job is to catch yourself before this happens, and learn to keep things challenging, even as you upgrade the rest of your life experience.
In other words: buy yourself better tools, not softer chairs.
—-
* Another great book that follows this style is Wired for Love by neruroscientist Stephanie Cacioppo – highly recommended for reading in parallel with a lover, whether new or old.
** not actually hard by reasonable human standards, but it seemed hard by my comfort addicted first world standards