Mortgage applications dropped for the second straight week, this time down 4% for the week ending May 28, 2021, according to the Mortgage Bankers Association‘s weekly mortgage applications survey.
This week’s data was compared to mortgage applications from the week of Memorial Day in 2020.
The overall housing index hit its lowest point since February, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“Tight housing inventory, obstacles to a faster rate of new construction, and rapidly rising home prices continue to hold back purchase activity,” Kan said. “The government purchase index declined to its lowest level in over a year and has now decreased year over year for five straight weeks. Purchase applications were down almost 2% from a year ago, but that was compared to the week of Memorial Day 2020.”
Kan added that refinance activity dropped for the second straight week, even as the 30-year fixed rate decreased slightly to 3.17%.
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“Even though rates have been below 3.2% over the past month, they are still around 20 to 30 basis points higher than the record lows in late 2020,” he said.
The refinance share of activity decreased to 61.3% of total mortgage applications from 61.4% the previous week. The FHA share of total mortgage applications increased to 9.6% from 9.1% the week prior, but the VA share of total mortgage applications decreased to 10.9% from 11.2%.
Here is a more detailed breakdown of this week’s applications data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.17% from 3.18%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.34% from 3.30%
The average contract interest rate for 30-year fixed-rate mortgages decreased to 3.16% from 3.2%
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.56% from 2.53%
The average contract interest rate for 5/1 ARMs decreased to 2.54% from 2.81%, with points remaining unchanged at 0.29 (including the origination fee) for 80% LTV loans.
Correction: An earlier version of this story incorrectly said the average interest rate for ARMs increased, when it decreased.
For the third week in a row, mortgage applications decreased.
Mortgage applications fell 3.1% in the week ending June 4, and refis took the biggest dip, according to the latest report from the Mortgage Bankers Association.
“Most of the decline in mortgage rates came late last week, with the 30-year fixed-rate mortgage declining to 3.15 percent,” said Joel Kan, the MBA’s vice president of economic and industry forecasting. “This likely impacted refinance applications, which fell 5% for both conventional and government loans. But purchase applications were up slightly last week, and the large annual decline was the result of Memorial Day 2021 being compared to a non-holiday week, as well as the big upswing in applications seen last May once pandemic-induced lockdowns started to lift.”
Compared to last year, fewer people are applying for purchase mortgages, the MBA reported, as home prices continue to rise and prospective buyers avoid astronomical bidding wars. Demand is still strong overall, especially in certain markets in the South and West.
“Housing demand is still far outpacing supply,” Kan said. “The average loan size on a purchase application edged down to $407,000, below the record $418,000 set in February — but still far above 2020’s average of $353,900.”
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The refinance share of activity decreased to 60.4% of total mortgage applications from 61.3% the previous week. The FHA share of total mortgage applications decreased to 9.5% from 9.6% the week prior, but the VA share of total mortgage applications increased to 11.2% from 10.9%.
Here is a more detailed breakdown of this week’s applications data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.15% from 3.17%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.29% from 3.34%
The average contract interest rate for 30-year fixed-rate mortgages decreased to 3.12% from 3.16%
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.52% from 2.56%
The average contract interest rate for 5/1 ARMs decreased to 2.54% from 2.81%, with points increasing to 0.39 from 0.29 (including the origination fee) for 80% LTV loans
Compass CEO Robert Reffkin revealed on CNBC how volatile mortgage rates are sidelining homesellers and why a boost in existing-home inventory could happen as early as December.
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Volatile mortgage rate increases have brought the housing market to a creep, as would-be homesellers desperately hold onto the savings they secured during 2020 and 2021’s historic interest rate drop. Since the federal government averted a disastrous June 2 debt default, rates have retreated to the mid-six-percent range — a drop that’s resulted in three consecutive weeks of increasing homebuyer mortgage demand.
So, what will it take to bring homesellers out of hiding and bring the housing market back to life? A five-percent mortgage rate, according to Compass CEO Robert Reffkin.
Robert Reffkin
“Across the board, there are more buyers than sellers,” Reffkin said during a CNBC appearance on Wednesday. “Buyers that have accepted six or seven percentage mortgage rates as a new normal. The issue that we have is there’s just not enough inventory, and that’s because 30 percent of homeowners are locked into mortgage rates at 3 percent or below, and 70 percent of homeowners are locked in a 4 percent or below.”
“We need to have an unlock [of] inventory. It’s probably going to happen when mortgage rates get to 5 to 5.5 percent in a sustainable level,” he added. “At that point, I would expect there to be a flood of inventory in the market. And we’ll feel like the pandemic craze all over again.”
Reffkin said some homebuyers are already bringing their rates down to the five-percent range through buydowns. There are two common ways to complete a buydown: paying a one-time discount point fee at closing to bring the rate down for the lifetime of the loan or using funds escrowed by the seller to temporarily drop the rate for the beginning of the loan.
“There are definitely incentives and buydowns bringing mortgage rates down by two points in a number of our markets,” he said.
While some homebuyers are waiting for the existing-home market to recover, Reffkin said a greater segment of homebuyers are simply turning their attention to the new-home market, which experienced a 20 percent year-over-year increase in May sales.
“[It’s a] great time to be a homebuilder because they’re benefiting from the price increases that are a result of low inventory,” he said. “Homebuilders are meeting [buyer] demand. Last month, we saw the largest amount of housing starts since 2016, and that’s because homebuilders, their sentiment index improved for the first time in over a year.”
Reffkin said it’ll likely be another year before rates drop to the five-percent range; however, the market could still experience a boost in existing-home inventory earlier as homeowners with adjustable-rate mortgages reevaluate the value of their current loans.
“The topic around adjustable rates, which I think people don’t fully appreciate, is that around 30 percent of the people that are locked in at three or four percent mortgage rates had adjustable rate mortgages that are five years, seven years or 10 years,” he said. “So the value of a 5-percent ARM they got in 2022, in six months is not that valuable anymore.”
The lock-in effect is the financial disincentive for existing homeowners to give up the low rate on their existing mortgage.
“You only have another year or year and a half” before ARM borrowers don’t feel locked in by the rate on their existing mortgage, he added. “So I think there’s going to be some new inventory entering the market, even if rates don’t come down because of those ARMs that are getting less value over time.”
Watch the full interview below:
[embedded content]
Editor’s note: This story has been updated to correct that Reffkin said around 30 percent of the people that are “locked in” to mortgages at lower rates have ARM loans, rather than 30 percent were “wanting” mortgages at lower rates.
PenFed and LightStream feature flexible personal loan products with attractive terms. Both are ideal for borrowers with good-to-excellent credit. That said, PenFed operates as a credit union, so you must become a member to apply for a personal loan. LightStream, on the other hand, serves anyone who meets its eligibility guidelines.
PenFed vs. LightStream at a glance
PenFed and LightStream offer personal loans at competitive rates. Here’s an overview of what to know about each when evaluating your options:
PenFed
LightStream
Bankrate Score
4.8
4.6
Better for
Emergency loans
Rapid funding
Loan amounts
$600-$50,000
$5,000-$100,000
APRs
7.74%-17.99%
7.99%-25.49% (with AutoPay discount)
Loan term lengths
1-5 years
2-7 years
Fees
None
None
Minimum credit score
700
Not specified
Time to funding
One to two days
Same-day funding available
PenFed personal loans
Pros
Low minimum loan amount.
No application or early repayment fees.
Co-signers permitted.
Cons
Membership required to apply for funding.
Eligibility guidelines not disclosed online.
Excellent credit needed to qualify.
PenFed takes the stress out of securing a personal loan to meet your financial needs. You can apply online in minutes without impacting your credit score. There’s also an option to use a co-signer to strengthen your approval odds. If you’re pre-approved for funding, you can view loan offers directly from the dashboard.
The starting APR is relatively low compared to what other lenders offer. You could get a loan term of up to 60 months to make the payments affordable. Even better, PenFed does not charge a host of pesky fees. You won’t be penalized if you wish to pay the loan off early. But you must be a member of the credit union to apply for a loan.
LightStream personal loans
Pros
No origination, late payment or prepayment fees.
Same-day funding.
Rate Beat Program.
Cons
Steep minimum loan amount.
Online prequalification not available.
Extensive credit history required.
LightStream, a division of Truist Bank, is a leader in the online lending space for many valid reasons. It offers loans for almost anything you can think of, and it features a seamless online application process that lets you explore options in real time. Plus, you can receive funding as soon as the same business day, and you won’t pay an origination fee. Or if you wish to defer the funding timeline, it can be pushed out as far as 30 days (or 90 days for home improvement loans).
The lender also doesn’t assess late fees or prepayment penalties, and its APRs are some of the best you’ll find in the industry. You could be eligible for an even lower APR if you’re approved for a comparable loan with a more competitive rate through another lender. LightStream will offer a discount of 0.1 percentage points to help you save on interest.
How to choose between PenFed and LightStream
Personal loans with both lenders are comparable. Still, PenFed offers a competitive edge if you’re seeking a small loan while LightStream gets you the cash you need sooner.
PenFed is better for emergency loans
You can take out a fee-free loan for as low as $600 with PenFed to get over your financial hump. However, this isn’t an option with LightStream, as the minimum loan amount is $5,000. So, if you’re dealing with a financial emergency and need to access a small amount of cash, PenFed is the better fit. You’ll avoid borrowing more than you need and avoid costly interest charges.
LightStream offers faster funding times
Perhaps you need to borrow a more sizable amount and have the funds in your account sooner than later. In this case, LightStream is ideal since borrowers can receive funding as soon as the same business day. You can borrow up to $100,000, which is significantly higher than the $50,000 limit with PenFed, and you won’t have to wait an extra day or two to access the cash you need.
Compare lenders before applying
PenFed and LightStream are both viable options if you have good-to-excellent credit. However, choosing the best fit comes down to your unique financial needs and what you’re looking for in a lender.
You’ll have the flexibility of choosing a loan amount and terms that work for you with both lenders. Still, some distinguishing factors can help you make an informed decision. PenFed has a lower loan limit and shorter terms than LightStream. However, its funding times are a bit slower. So, if you need a large amount of funding quickly, LightStream is likely a better fit. But PenFed could be best if you only want to borrow a small amount or wish to use a co-signer.
Be sure to get quotes from both lenders before applying. Also, shop around with one or two additional lenders to determine if better options are available elsewhere.
If you can make it anywhere, can you make it here?
When looking into the bustling metropolis of New York City, it’s easy to be swept up in the kaleidoscope of city lights, towering skyscrapers and the ceaseless symphony of life that dances through its streets. However, amidst the hypnotic allure of the city that never sleeps, practical considerations emerge. Considerations like the economics of living in this urban paradise. A particular question looms large: “What is the average salary in New York, and how far does a $100,000 salary stretch?”
The average salary in New York is a topic of interest for both locals and those considering a move to this vibrant city. While the average salary in NYC currently hovers just above $50,000, for many, $100,000 seems to be a gold standard, a signpost that one has ‘made it.’ However, the reality of living in New York with this salary can prove more challenging than you might think in a metro that has this much to offer.
Rent
In terms of housing, the median rent in New York as of July 2023 is $4,364, translating to over $52,000 annually. That’s more than half of a $100,000 salary spent on accommodation alone. Yet, New York’s diverse range of neighborhoods offers options for different lifestyles and budgets. While Manhattan may command sky-high prices, boroughs like Queens or the Bronx may offer more affordable rents without compromising the quintessential New York experience.
Transportation
Transportation, another major consideration, can be relatively affordable. Opting for public transport, the subway costs $2.75 per ride, with a monthly MetroCard costing $127. This equates to a yearly expense of $1,524 if one is commuting daily — a mere fraction of the $100,000 salary. Of course, for those desiring the convenience of a car, parking fees, insurance and fuel costs can add a significant amount to this figure.
Food
Food and entertainment are areas where New York truly shines. The city’s multicultural tapestry has created a food scene like no other. Eating out in New York can be an adventure, with price points to suit every pocket. For a foodie earning an average salary in New York, a mix of dining out and cooking at home can balance the budget nicely. Let’s say you spend about $400 per month on groceries and $200 on dining: That’s a total of $7,200 annually.
Entertainment
The city’s entertainment scene is equally diverse. A night out at a Broadway show, a visit to one of the city’s many world-class museums or a concert in Central Park could set you back, but it’s part of the allure that makes New York, New York. An allocation of $500 per month towards entertainment, while on the generous side, equals $6,000 per year.
Everything else
Add in additional expenses like utilities, health insurance and personal care, and you’re looking at another $10,000-$15,000 annually, depending on individual needs and choices. All these expenses combined, a $100,000 salary in New York can offer a comfortable lifestyle, though without much room for extravagant splurges.
New York job market at a glance
New York’s economic tapestry is just as dynamic as the city itself. The city is a magnet for talent, driven by a wide range of industries that form its thriving economic ecosystem. While it’s nearly impossible to encapsulate every facet of this ever-evolving landscape, a few industries and employers emerge as the city’s backbone.
Finance
New York’s Wall Street is globally synonymous with finance. It is the heart of the world’s financial markets, housing the New York Stock Exchange and NASDAQ, two of the largest stock exchanges worldwide. Major employers in this sector include Goldman Sachs, JPMorgan Chase and Morgan Stanley. Not only does the industry provide direct employment, but it also fuels ancillary services like law, consulting and real estate.
Healthcare
Healthcare is a top employer in New York, contributing significantly to the city’s employment landscape. The city boasts world-class hospitals and research institutions, including NewYork-Presbyterian Hospital, Mount Sinai Health System and Northwell Health. These organizations offer a wide range of roles, from clinicians to administrative staff, reflecting the sector’s diversity.
Tech
New York’s tech scene has experienced explosive growth over the past decade, earning the moniker ‘Silicon Alley.’ The city is home to tech giants like Google and Amazon, who’ve set up major outposts here. Additionally, it hosts a solid startup ecosystem, featuring companies like Etsy, MongoDB and Datadog, just to name a few.
Media and entertainment
New York’s media industry is renowned worldwide, with numerous media conglomerates calling the city home. These include Time Warner, ViacomCBS and The New York Times. The city’s thriving entertainment sector hosts Broadway, a global beacon for theatre and major television networks like NBC and ABC.
Retail and fashion
New York is a global fashion capital, playing host to renowned fashion houses and designers. Do Vera Wang, Michael Kors and Donna Karan sound familiar? It’s also home to retail giants like Macy’s and Bloomingdale’s. The fashion week in New York further bolsters the city’s reputation as a leader in fashion and retail.
Tourism and hospitality
New York’s iconic landmarks, from Times Square to Central Park, attract millions of tourists each year. This fuels a vibrant tourism and hospitality industry, with major employers including hotel chains like Marriott and Hilton, as well as tons of restaurants and service providers.
Education
With prestigious institutions like Columbia University and New York University, education is a major employer in New York. These institutions offer employment opportunities in teaching, research, administration and support roles.
Find a new apartment in New York
Given these numbers, it becomes clear that while a $100,000 salary is substantial, it’s also relative. What it offers depends on a variety of factors — lifestyle choices, neighborhood, family size and more. Overall, a prudent financial approach can help navigate the complexity and allow one to savor the flavors of the Big Apple without biting off more than they can chew.
Airline credit cards typically offer standard benefits, like bonus miles on airfare purchases, free checked bags and priority boarding. But one of the most valuable perks any airline credit card can offer is a companion ticket that can cut your cost of travel in half.
Thanks to its high welcome bonuses, earning structure and airfare discounts, the British Airways Visa Signature Card has long been considered one of the best credit cards from a foreign airline offered in the U.S., especially when you consider British Airways’ extensive U.S. route network. But it also comes with one of the most interesting companion travel benefits: the Travel Together Ticket.
The rules around redeeming this perk have recently been improved, and it is now easier to use and more valuable than ever.
Here are the details on this companion deal and how to maximize it.
How to earn the British Airways Travel Together Ticket
U.S.-based British Airways Visa Signature Card cardholders who spend $30,000 on their card in a calendar year can earn a Travel Together Ticket (posted within 4-6 weeks). The voucher is valid for outbound travel up to 24 months from the issue date (the return flight can be after that).
The British Airways Visa Signature Card offers 75,000 Avios after spending $5,000 in the first three months and exclusive offers when flying the carrier, such as a 10% discount on British Airways flights originating in the U.S., up to $600 in statement credits for award flight taxes and fees every year and earns 3 Avios per $1 spent with British Airways, Aer Lingus, Iberia and Level. The annual fee is $95.
Only the main cardholder with a registered address in the U.S. is eligible to earn the Travel Together Ticket; additional cardholers are not. Only one voucher can be earned each calendar year, even if the cardholder spends more than $30,000 on the card.
Rules for redeeming The Travel Together Ticket
The Travel Together Ticket comes with several conditions worth considering when it comes time to redeem it, some of which are positive and some negative.
Previously, these vouchers could only be applied to award bookings using British Airways Avios and on British Airways-operated flights. However, this rule has recently been relaxed, so they can now be redeemed on flights operated by Aer Lingus and Iberia, though note you must still book your flight(s) through British Airways Executive Club.
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The Travel Together Ticket differs from other companion tickets, which are more like a two-for-one paid deal. In this case, you’re getting a two-for-one award redemption but are still responsible for the taxes and other carrier-imposed charges on your ticket (which can be substantial). This also means you’ve got to find two awards open on the same itinerary in the same cabin. If you wish to travel in first class, two award seats on the same flight can be tough to come by.
For solo travel, you can redeem it for 50% of the Avios required for one passenger, which is a handy perk if you would rather travel alone and save Avios.
Previously, the voucher could only be used on round-trip itineraries originating in the United States. However, this rule has also recently been relaxed, so voucher holders can now commence their itinerary anywhere in the world that British Airways, Iberia or Aer Lingus operates from (provided there is Avios availability).
Your companion must be booked in the same cabin on your itinerary (unless you redeem it for solo travel). So if you book a business-class award for yourself, you must find a second one for your companion on the same itinerary. Stopovers are allowed.
Though the terms are not explicit, you should plan to have your card open and in good standing at the time your want to use your Travel Together Ticket.
Related: How to avoid fuel surcharges on award travel
When it makes sense to redeem the Travel Together Ticket
Now we come to the real question: Is it worth using the Travel Together Ticket? The answer depends on how you plan to redeem it.
British Airways awards are notorious for high taxes and surcharges on flights through London. While this generally makes economy awards a bad value, it can still be worth paying less than $2,000 per person to fly in business or first class as part of an award ticket compared to shelling out the cash fare, which will be many thousands of dollars, especially with premium fares across the Atlantic as high as they currently are.
BA introduced a new option in 2022 called Reward Flight Saver to use more Avios to reduce the cost of the taxes and surcharges on Avios redemptions.
British Airways award availability between the U.S. and Europe tends to be much better than what U.S. and other European carriers make available. So if you want to book an award, your chances of finding it are good.
The other key benefit is that British Airways has retained an award chart, so you can be confident of how many Avios you will need on any day — no 400,000 points per flight pricing with this program.
Related: Dynamic pricing vs. fuel surcharges — which is the lesser of two evils for your next redemption?
Now, let’s take four scenarios and compare the cost of using the Travel Together Ticket compared to purchasing airfare to determine whether this is a good deal.
To make things simpler, we’ll look at a single route from Atlanta (ATL) to London Heathrow (LHR) over a single set of dates in November since award availability was open across all four cabins offered by BA on these flights (these are off-peak dates). The taxes and fees are typical examples of what you would expect to pay, both for two people traveling together and solo travelers, given the ticket can also be redeemed for solo travel.
First up, economy. A round-trip award on this itinerary for two people using the lowest surcharge Reward Flight Saver option would cost 120,000 Avios plus 300 British pounds ($393) in taxes/fees.
If you were using this as a Travel Together Ticket, you’d still be paying 60,000 Avios plus $393 for two tickets. This is because you would only be charged the Avios for one passenger but the fees, taxes and surcharges for both. Compare that to the regular economy fare on the same dates of around $1,000 per person for non-stop flights and this would be a great way to use Avios to save hundreds of dollars.
If you are a solo traveler, you can redeem the Travel Together Ticket for 30,000 Avios plus $196 in fees, taxes and surcharges, saving over $800 on the cash fares for the same flight.
Related: A review of British Airways’ A350 in economy from London to Dubai
Now for premium economy. Here’s a sample award from the same week that would cost 190,000 Avios plus 660 British pounds ($864) for two passengers.
A paid fare on the same dates would be $1,813 per person, so $3,626 for two passengers. With a Travel Together Ticket for two passengers, you would be charged 95,000 Avios plus $864, saving you thousands off the cash ticket.
Solo travelers could redeem 45,000 Avios plus pay $432 in taxes and surcharges, another excellent way to save big on the $1,813 cash fare.
Related: Is British Airways premium economy worth it on the Boeing 777-300ER?
In business class, British Airways will charge 360,000 Avios plus 900 British pounds ($1,179) in taxes and surcharges for two passengers at the Reward Flight Saver rate.
With the 50% reduction in Avios with the Travel Together Ticker, you would still be charged a huge 180,000 Avios plus the full $1,179 co-payment. However, with cash fares on these dates close to $4,000 each roundtrip in business class, you would still save thousands of dollars using the voucher.
For solo travelers, just 90,000 Avios plus under $600 in taxes and fees saves versus $4,000 for a cash ticket is a great deal.
Related: British Airways’ Club Suites don’t disappoint: On board a retrofitted 777 from London to New York
Reward Flight Savers are not offered in first class, so while you’ll only need marginally more Avios than the business class rates above, you must pay the full fees, taxes and surcharges. For two passengers using a Travel Together Ticket this would be 170,000 Avios roundtrip plus an eye-watering 3,263 British pounds ($4,279).
While this would represent a decent saving on the cash fares of almost $6,000 per person, given the thousands of dollars of surcharges you must pay for a first class redemption, using the voucher for business class instead would be a much better deal.
How to earn Avios
If you want to use a Travel Together Ticket but don’t have enough British Airways Avios in your Executive Club account, British Airways is a transfer partner of Capital One, Chase Ultimate Rewards, American Express Membership Rewards, Bilt Rewards and Marriott Bonvoy, making Avios one of the easiest currencies to earn.
Points transfer from Chase, Bilt and Amex at a 1:1 ratio (in addition to occasional transfer bonuses of up to 40%), while Marriott points transfer to Avios at a 3:1 ratio. Plus, you’ll get a 5,000-Avios bonus for every 60,000 Marriott points transferred.
The following cards all currently offer strong welcome bonuses that you could easily convert to Avios:
American Express® Gold Card: Earn 60,000 Membership Rewards points after you spend $4,000 on purchases in the first six months of account opening. Terms apply.
The Platinum Card® from American Express: Earn 80,000 Membership Rewards points after you spend $6,000 on purchases within the first six months of card membership. Check to see if you’re targeted for a 125,000-point welcome offer through CardMatch (offer subject to change at any time). Terms apply.
Capital One Venture Rewards Credit Card: (see rates and fees) Earn 75,000 bonus miles once you spend $4,000 on purchases within the first three months from account opening.
Capital One Venture X Rewards Credit Card: (see rates and fees) Earn 75,000 bonus miles once you spend $4,000 on purchases within the first three months from account opening.
Chase Sapphire Preferred Card: Earn 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening.
Chase Sapphire Reserve: Earn 60,000 bonus points after you spend $4,000 on purchases in the first three months from account opening.
Ink Business Preferred Credit Card: Earn 100,000 bonus points after you spend $8,000 on purchases in the first three months from account opening.
Bottom line
The British Airways Visa Signature Card’s Travel Together Ticket can save you thousands of dollars on British Airways, Iberia or Aer Lingus flights from anywhere in the world by allowing two passengers to travel together, in any cabin with award availability and only pay the Avios required for one passenger. The spending requirement to earn the perk is high, though.
Following last years Reward Flight Saver rollout to allow passengers to reduce the notorious BA carrier-imposed surcharges by paying more Avios, this voucher is a valuable credit card perk for economy, premium economy and business class flights. However, the savings are less in first class as the Reward Flight Saver option is not available.
The stock market took a hit yesterday with the Dow setting a record for most points dropped in a single day. With the flight to safety from investors, the bond market rallied, pushing the yield lower on the 10-year Treasury note.
Mortgage rates, which are closely tied to the 10-year yield, similarly moved lower. Read on for more details.
Where are mortgage rates going?
Treasury yields move back up today
Unless you live under the proverbial rock, you know that the stock market got slammed yesterday, with the Dow falling by more points (1,175) than any day in its existence.
Click here to get today’s latest mortgage rates (Jul. 22, 2023).
Naturally, there has been a lot of commentary on the matter (with the two leading theories being increasing inflation and a faster tightening schedule from the Fed) but the reality of the situation is that nobody really knows exactly why it happened.
Short term corrections aren’t anything out of the ordinary, so while they do create quite a fuss on Wall Street, there’s no need to go into a full panic. The fact that no one truly knows everything about what’s happening is made clear when you look at all of the various predictions for what will happen next.
There are basically two camps out there: those that think the decline will continue, and those who don’t. Right now, it’s kind of a mix, with bond yields rising and mixed results in the stock market.
The yield on the 10-year Treasury note, which is the best market indicator of where mortgage rates are going, is up a little over four basis points since the start of the day, putting it at 2.75%. That’s still down from yesterday’s peak of 2.88%.
Mortgage rates typically move in the same direction as the 10-year yield and similarly moved lower yesterday only to retreat back up slightly today.
Where we go from here is really anyone’s guess. There’s not a lot of economic data out the rest of the week to sway investors in one direction or the other.
Rate/Float Recommendation
Lock now while rates are down on the week
Mortgage rates are down on the week, which is great news for borrowers. If you’re thinking of purchasing or refinancing, now is the perfect time to lock in a rate. The long-term projection is for mortgage rates to rise so taking action sooner rather than later is likely to get you the better deal.
Click here to head to our Mortgage Builder and figure out how much you could save.
Today’s economic data:
International Trade
The nation’s trade deficit widened to $53.1 billion in December. That’s more than the $51.9 billion that analysts had predicted.
Fedspeak
St. Louis Fed President James Bullard at 8:50am
JOLTS
The Labor Department’s latest data is showing 5.811 million job openings in December.
Get the GreenLight and close in 21 days*
Notable events this week:
Monday:
PMI Services Index
ISM Non-Mfg Index
Tuesday:
International Trade
Fedspeak
JOLTS
Wednesday:
Fedspeak
EIA Petroleum Status Report
10-Yr Note Auction
Thursday:
Fedspeak
Jobless Claims
Friday:
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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 rates fluctuated again last week, down 5 basis points to 2.95% after managing to pop back up to 3% the week prior, according to Thursday data from Freddie Mac‘s PMMS. Mortgage rates have been hovering around 3% for over a month now, as macro economic factors left the bond market hesitant over the global recovery.
“Mortgage rates are down below three percent, continuing to offer many homeowners the potential to refinance and increase their monthly cash flow,” said Sam Khater, Freddie Mac’s chief economist. “In fact, homeowners who refinanced their 30-year fixed-rate mortgage in 2020 saved more than $2,800 dollars annually. Substantial opportunity continues to exist today, as nearly $2 trillion in conforming mortgages have the ability to refinance and reduce their interest rate by at least half a percentage point.”
Low rates not only save homeowners looking to refinance, they also help offset the steep increases in home prices. Steep competition — spurred by low mortgage rates, demographic factors and an improving national economy — is pushing home prices up at the strongest pace in a decade, with sales happening at lightning speed and often for well above list price.
Record low rates lit the fire under what was a scorching hot market in 2020 with some economists speculating rising rates may be the best option for cooling it back down. As rates rise, demand wanes and builders can catch up on the few months of inventory left for hungry borrowers.
“Mortgage rates over 3.75% should change the housing market landscape from its currently overheated state for both the new and existing home sales,” said Logan Mohtashami, HousingWire’s lead analyst.
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According to Mohtashami, the new home sector can’t compete with the existing home sales market in terms of price, so when mortgage rates increase, it’s more of a disadvantage to the new home sales market. If new home sales don’t grow, housing construction will slow down.
“We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes,” said Lawrence Yun, National Association of Realtors‘ chief economist. “The falling number of homeowners in mortgage forbearance will also bring about more inventory.”
After two straight weeks of increases, mortgage applications dropped 4.2% for the week ending May 21, 2021, according to the Mortgage Bankers Association‘s weekly mortgage applications survey.
“Demand is robust throughout the country, but homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
Kan noted that refinances decreased as well — by 7%, and 9% lower year over year — driven by declines in both conventional and government refinance activity.
“And purchase applications increased for the second time in three weeks, rebounding after a rather weak April with mostly weekly declines,” he said. “While purchase activity was around 4% lower than a year ago, the comparison is to last spring’s large upswing in activity as pandemic-related lockdowns lifted.”
After hovering below 3% for a month, the average 30-year fixed mortgage rate according to the Freddie Mac PMMS popped back up six basis points to exactly 3% last week. Rates climbed north of 3% over the first few months of 2021, but crested at 3.2% in March before descending again.
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The refinance share of activity decreased to 61.4% of total mortgage applications from 63.3% the previous week. The FHA share of total mortgage applications decreased to 9.1% from 9.2% the week prior. The VA share of total applications decreased to 11.2% from 12%.
Here is a more detailed breakdown of this week’s mortgage applications data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.18% from 3.15%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.30% from 3.31%
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.20% from 3.13%
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.53% from 2.54%
The average contract interest rate for 5/1 ARMs increased to 2.81% from 2.58%
You may remember GMAC Bank, which was taken down by its fateful mortgage arm Residential Capital (ResCap) before eventually requiring a government bailout.
It wasn’t an uncommon story at the time; many other mega mortgage companies took a fall too, including the likes of Countrywide and IndyMac, to name but two.
Anyway, ResCap was a big mortgage player back in the day, originating billions of residential home loans in the lead up to the housing bubble. Then it all came crashing down…
Once the company recovered from the financial crisis, it rebranded itself as Ally Financial, offering auto loans and high-yield savings accounts. Those businesses seemed like a safe way to dip their toes back in the lending waters.
The auto loan portion of the business actually runs deep in its history seeing that GMAC stood for General Motors Acceptance Corporation. So you knew they were going to get back into that business, but the mortgage business was still a big question mark.
They’re Back…with a Brand New Name
After the Great Recession it became common to rebrand if you made it through
Seeing that many companies faced lawsuits and bad PR
That explains why ResCap is now known as Ally Home
It gives them a fresh start and lets them forget all those painful memories
Somehow these large companies have a way of reinventing themselves, with fresh new names and logos that can make us all forget the ugly past very quickly.
And so without further ado, say hello to “Ally Home,” which is the company’s new direct-to-consumer mortgage offering.
It’s yet another home loan option available to borrowers in the post-crisis mortgage world.
In line with the name change, they seem to want to be your buddy in the financial world, hence the word ally. And they deploy a so-called “Home Team” to help you get your mortgage.
What Does Ally Home Offer?
They other both home purchase and refinance loans
Including the ability to get cash out if you need it
Ally accepts conforming and jumbo loan amounts
And has a variety of home loan products including fixed mortgages and ARMs
Like other mortgage lenders, Ally offers both purchase and refinance mortgages, including rate and term and cash-out refis.
So whether you’re buying a home or simply looking to improve your existing interest rate/tap equity, they’ve got you covered.
Additionally, Ally Home offers both conventional and jumbo mortgages, the latter of which are above the conforming loan limit of $417,000 (soon to be $424,100). And now $453,100!
In terms of mortgage choice, you’re able to get a 30-year or 15-year fixed, along with less common varieties such as the 25-year, 20-year, and 10-year fixed.
The company also offers a typical selection of hybrid ARMs, including the 10/1, 7/1, and 5/1 ARM. The only obvious absence if the 3/1 ARM.
So they’ve basically got you covered when it comes to home loan options unless you’re looking for something super unique.
Ally Mortgage Rates Are Very Competitive on Jumbo
First things first, they actually advertise their rates on their website
Which is a nice sign of transparency
Their rates seem to be fairly middle-of-the-road for conforming loans
But really competitive when it comes to high-cost/jumbo loans so definitely check them out if you’ve got a big loan
One thing I appreciate about Ally is the fact that they openly advertise their mortgage interest rates, unlike a lot of other lenders.
So they win on transparency right off the bat. Now let’s determine if the advertised rates are any good.
As of the time of this writing (August 1st, 2018), Ally Home Loans was offering a rate of 4.75% on a 30-yr fixed with -0.22 mortgage points, with lots of assumptions like excellent credit, a $300,000 loan amount, and a minimum 20% down payment for a single-family home.
That negative amount of points means you get a credit toward closing costs, which is a good thing since a lot rates often require that you pay points out of your pocket at closing.
Interestingly, their jumbo mortgage rates seem to be significantly cheaper than their conforming ones, so it might be a good place to send a larger loan if you’ve got your eye on a particularly expensive property (or already happen to own one).
For example, they were offering a rate of 4.375% on a 30-year fixed for the same assumptions above, except for a loan amount of $650,000. Technically that’s just a high-cost conforming loan amount, but I won’t get into all that.
The point is they seem to specialize in larger loan amounts and offer really competitive rates on that front.
But even if their rate isn’t the lowest, they offer a so-called Price Match Guarantee where they’ll lower their rate/points to match those of a competitor. Oddly, they won’t go the extra step and beat them…hmm.
Ally Home Wants to Deliver a High-Touch Experience
As noted Ally wants to be your friend and more specifically your ally
That means you should get a lot of contact and guidance along the way
With a loan advisor, loan coordinator and closing coordinator there to assist
You can choose to receive updates via email or phone and dedicated support is available from application to close
Unlike a lot of mortgage newcomers, Ally Home wants to be super involved with you throughout the underwriting process.
They refer to it as a “high-touch experience” in which customers are guided through the entire home loan journey with a knowledgeable stable of so-called “dedicated loan experts.”
This runs counter to some of the fintech startups that cater to Millennials who apparently don’t ever want to speak to another human, ever.
That’s totally fine, but it appears Ally wants to bring back the human element and focus heavily on customer service with its group of loan advisors, loan coordinators, and closing coordinators known as the Ally Home Team.
This will include dedicated support, frequent loan updates, online access to all loan-related documents from any device, and a variety of communication options like text, phone, or e-mail.
Ally Home has also partnered with LenderLive to handle mortgage fulfillment, settlement and document services in an expeditious and compliant manner.
And most recently invested in Better Mortgage, another so-called “digital mortgage disruptor” in the space, to take advantage of their tech-heavy mortgage origination platform.
The hope is to provide the best possible mortgage experience by combining the best people with the best technology in the industry.
If you’re keeping track, three of the largest mortgage lenders during the prior boom have now risen from the ashes.
Former Countrywide execs successfully launched PennyMac, IndyMac transformed into OneWest Bank, and ResCap’s parent company has now introduced Ally Home.