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UK ‘mortgage meltdown’ looms amid ‘terrifying’ growth in arrears

Jump in borrowers unable to make payments with landlords particularly hit and ‘worse to come’

  • Analysis: will the Bank listen to business and halt rate rises?

Mortgage balances with arrears jumped by 13% in the second quarter of the year to the highest level since 2016, according to Bank of England figures that underscore the stress in the UK mortgage market.

Rising interest rates and unemployment over recent months have put pressure on household disposable incomes, forcing some families to cut or suspend their monthly mortgage payments.

Buy-to-let mortgage payers have also come under pressure in parts of the country where tenants are struggling with the cost of living crisis.

The Bank of England said the total value of mortgage balances which had some arrears rose to £16.9bn, up by 29% on the previous year and the highest since the third quarter of 2016.

Mortgage arrears are based on figures showing the number of borrowers failing to make payments equivalent to at least 1.5% of the outstanding mortgage balance or where the property is in possession.

Mortgage lending was also hit in the second quarter with gross advances falling by £6.3bn to £52.4bn. Year on year, mortgage lending slumped by almost a third, to the lowest level since the worst of the Covid-19 collapse in lending in the second quarter of 2020.

Lewis Shaw, founder of Mansfield-based Shaw Financial Services, told the news agency Newspage a “mortgage meltdown” is approaching, unless the Bank of England changes its approach.

Shaw said: “The speed at which mortgage arrears are increasing is terrifying and should give cause to pause at the next Bank of England interest rate meeting. This is dire data, and we know that it’s about to get an awful lot worse with 1.6m mortgage holders due to renew over the next 12 months at significantly higher rates than anyone has been used to for well over a decade.”

Simon Gammon, managing partner at the finance arm of estate agents Knight Frank, said the proportion of mortgage payers falling behind with payments remained low at just 1%, despite the “sizeable jump in arrears”.

He said: “That’s because the vast majority of outstanding mortgages were issued under the post-global financial crisis regime, which was much more stringent when it comes to affordability.”

However, while homeowners were more likely to make cuts to other spending before falling behind with mortgage payments, buy-to-let landlords may take a different view, he said.

“We are more likely to see arrears in the buy-to-let sector, where landlords face a unique set of challenges. If a landlord finds their mortgage is no longer affordable, or the rent no longer covers their outgoings, they only have two choices – sell or default. If they opt to sell, they may have to wait up to a year for the tenancy to end, unless they are willing to sell with a tenancy in place, which is more difficult.

“Landlords are also more likely to opt to default than those struggling with a mortgage secured against their main residence, so this is an area to watch,” he added.

Incoming Bank of England deputy governor Sarah Breeden said she agreed with her future colleagues on the monetary policy committee (MPC), which sets UK interest rates, that inflation may fall at a slower pace next year than expected, forcing the central bank to keep the cost of borrowing higher for longer than expected.

Breeden, who will replace Jon Cunliffe as the Bank’s deputy governor for financial stability after the MPC’s meeting next week, said there was also a risk that growth and unemployment will worsen.

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“I will, after November, be very careful in balancing those two factors: the risk of inflation becoming embedded through more persistent, second-round effects, as well as the impact of tightening coming through,” she told parliament’s Treasury Committee in a hearing convened to approve to her appointment.

“The challenge right now is that wages are high and rising and there is a real risk that second-round effects means that this inflation becomes embedded,” she said, adding that in keeping a lid on inflation, “it is not our intention to cause a recession”.

The MPC is expected to raise interest rates by a quarter point to 5.5% on 21 September, raising the average mortgage payments by £3,000 a year for a household that refinances a 2-year fixed product.

Breeden said she expected inflation to be “around the [Bank of England’s] 2% target in two years’ time”.

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Source: theguardian.com

Apache is functioning normally

Apache is functioning normally

There are two sides to inflation for consumers: The rising cost of goods and services means that the basic cost of living rises for most people. But the right amount of inflation can spur production and economic growth.

Deciding whether inflation is good or bad therefore depends on how various factors might play out in different economic sectors.

What Is Inflation?

Inflation is an economic trend in which prices for goods and services rise over time. The Federal Reserve uses different price indexes to track inflation and determine how to shape monetary policy.

Generally speaking, the Fed targets a 2% annual inflation rate as measured by pricing indexes, including the Consumer Price Index. Historically, though, the inflation rate has been about 3.3%.

Rising demand for goods and services can trigger inflation when there’s an imbalance in supply. This is known as demand-pull inflation.

Cost-push inflation occurs when the price of commodities rises, pushing up the price of goods or services that rely on those commodities.

Asking whether inflation is bad isn’t the right lens for this economic factor. Inflation can have both pros and cons for consumers and investors. Understanding the potential effects of inflation can maximize the positives while minimizing the negatives.
💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

Is Inflation Good or Bad?

Answering the question of whether inflation is good or bad means understanding why inflation matters so much. The Federal Reserve takes an interest in inflation because it relates to broader economic and monetary policy.

Some level of inflation in an economy is normal, and an indication that the economy is continuing to grow. While inflation has remained relatively low over the past decade, it has historically seen the most change during or right after recessions.

The Fed believes that its 2% target inflation rate encourages price stability and maximum employment.

Recommended: 7 Factors That Cause Inflation

Broadly speaking, high inflation can make it difficult for households to afford basic necessities, such as food and shelter. When inflation is too low, that can lead to economic weakening. If inflation trends too low for an extended period of time, consumers may come to expect that to continue, which can create a cycle of low inflation rates.

That sounds good, as lower inflation means prices are not increasing over time for goods and services. So consumers may not struggle to afford the things they need to maintain their standard of living. But prolonged low inflation can impact interest rate policy.

The Federal Reserve uses interest rate cuts and hikes to keep the economy on an even keel. For example, if the economy is in danger of overheating because it’s growing too rapidly, or inflation is increasing too quickly, the Fed may raise rates to encourage a pullback in borrowing and spending.

Conversely, when the economy is in a downturn, the Fed may cut rates to try to promote spending and borrowing.

When both inflation and interest rates are low, that may not leave much room for further rate cuts in an economic crisis, which may spur higher employment rates. If prices for goods and services continue to decline, that could lead to a period of deflation or even a recession.

So, is inflation good or bad? The answer is that it can be a little of both. How deeply inflation affects consumers or investors — and who it affects most — depends on what’s behind rising prices, how long inflation lasts, and how the Fed manages interest rates.

What Is Core Inflation?

Core inflation measures the rising cost of goods and services in the economy, but excludes food and energy costs. Food and energy prices are notoriously volatile, even though demand for these staples tends to remain steady.

Both food and energy prices are partly driven by the price of commodities — which also tend to fluctuate, owing to speculation in the commodities markets. So the short-term price changes in these two markets make it difficult to include them in a long-term reading of inflationary trends: hence the core inflation metric.

The Consumer Price Index and the core personal consumption expenditures index (PCE) are the two main ways to measure underlying inflation that’s long term.

Who Benefits from Inflation?

The Federal Reserve believes some inflation is good and even necessary to maintain a healthy economy. The key is keeping inflation rates at acceptable levels, such as the 2% annual inflation rate target. Staying within this proverbial Goldilocks zone can result in numerous positive impacts for consumers and the economy in general.

That said, the core inflation rate began to climb out of that range in Q1 of 2021, and reached a peak of about 9.02% in June 2022. As of Q3 2023, the inflation rate has eased down in the 4.0% range, according to data from the Consumer Price Index.

Inflation Pros

Sustainable inflation can yield these benefits:

•   Higher employment rates

•   Continued economic growth

•   Potential for higher wages if employers offer cost-of-living pay raises

•   Cost-of-living adjustments for those receiving Social Security retirement benefits

The danger, of course, is that inflation escalates too rapidly, requiring the Federal Reserve to raise interest rates as a result. This increases the overall cost of borrowing for consumers and businesses.

Who Is Inflation Good For?

Inflation can benefit certain groups, depending on how it impacts Fed shapes monetary policy. Some of the people who can benefit from inflation include:

•   Savers, if an interest rate hike results in higher rates on savings accounts, money market accounts or certificates of deposit

•   Debtors, if they’re repaying loans with money that’s worth less than the money they borrowed

•   Homeowners who have a low, fixed-rate mortgage

•   People who hold investments that appreciate in value as inflation rises

💡 Quick Tip: Distributing your money across a range of assets — also known as diversification — can be beneficial for long-term investors. When you put your eggs in many baskets, it may be beneficial if a single asset class goes down.

Who Does Inflation Hurt the Most?

Some of the negative effects of inflation are more obvious than others. And there may be different consequences for consumers versus investors.

Inflation Cons

In terms of what’s bad about inflation, here are some of the biggest cons:

•   Higher inflation means goods and services cost more, potentially straining consumer paychecks

•   Investors may see their return on investment erode if higher inflation diminishes purchasing power, or if they’re holding low-interest bonds

•   Unemployment rates may climb if employers lay off staff to cope with rising overhead costs

•   Rising inflation can weaken currency values

Inflation can be particularly bad if it leads to hyperinflation. This phenomenon occurs when prices for goods and services increase uncontrolled over an extended period of time. Generally, this would mean an inflation growth rate of 50% or more per month. While hyperinflation has never happened in the United States, there are many examples from different time periods around the world: For example, Zimbabwe experienced a daily inflation rate of 98% in 2007-2008, when prices doubled every day.

Recommended: How to Protect Yourself From Inflation

Who Is Inflation Bad For?

The negative impacts of inflation can affect some more than others. In general, inflation may be bad for:

•   Consumers who live on a fixed income

•   People who plan to borrow money, if higher interest rates accompany the inflation

•   Homeowners with an adjustable-rate mortgage

•   Individuals who aren’t investing in the market as a hedge against inflation

Inflation and higher prices can be detrimental to retirees whose savings may not stretch as far, particularly when health care becomes more expensive.

If the cost of living increases but wages stagnate, that can also be problematic for workers because they end up spending more for the same things.

Recommended: Cost of Living by State Comparison (2023)

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How to Invest During Times of Inflation

While inflation is an investment risk to consider, some investing strategies can help minimize its impact on your portfolio.

How to Protect Your Money From Inflation

The first step is to understand that inflation rates may be variable from year to year, but the upward trend in the cost of goods and services is typically a factor investors must contend with. Essentially, if inflation is historically about 2% per year, it’s ideal to look for returns above that.

For example, while savings accounts may yield more interest if the Fed raises interest rates, investing in stocks, exchange-traded funds (ETFs) or mutual funds could generate higher returns, though these investments also come with a higher degree of risk.

•   Diversification. Having a diversified portfolio that includes a mix of stock and bonds and other asset classes may help mitigate the impact of inflation.

•   Always be aware of investment costs and the impact of taxes and fees. Minimizing investment costs is a time-honored way to keep more of what you earn.

•   Investing in Treasury-Inflation Protected Securities (TIPS). TIPS are government-issued securities designed to generate consistent returns regardless of inflationary changes.

•   If prices are rising, that can increase rental property incomes. You could benefit from that by investing in real estate ETFs or real estate investment trusts (REITs) if you’d rather not own property directly.

•   Compounding interest allows you to earn interest on your interest, which is key to building wealth.

•   Dollar-cost averaging means investing continuously, whether stock prices are low or high. When inflationary changes are part of a larger shift in the economic cycle, investors who dollar-cost average can still reap long term benefits, despite rising prices.

The Takeaway

Inflation is unavoidable, but you can take steps to minimize the impact to your personal financial situation. Building a well-rounded portfolio of stocks, ETFs and other investments is one strategy for keeping pace with rising inflation. Being aware of how taxes and fees can impact your returns is another way to keep more of what you earn.

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FAQ

How is economic deflation different from inflation?

Deflation is when the cost of goods and services trends downward rather than upward (the sign of inflation). Deflation can be positive for consumers, as their money goes further, but prolonged deflation can also be a sign of a contraction.

How do homeowners benefit from inflation?

Typically tangible assets like real estate tend to increase in value over time, even in the face of inflation. Currency, on the other hand, tends to lose value.

How does the government measure inflation?

The Bureau of Labor Statistics produces the Consumer Price Index (CPI), based on the change in cost for a range of goods and services. The CPI is the most common measure of inflation.

Photo credit: iStock/AJ_Watt

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In an age where flexibility and adaptability are paramount, the demand for at-home workspace furnishings has never been greater. Whether you’re a student taking virtual learning classes or a professional seeking an at-home office setup, the right wall desk can make all the difference. We’ve pulled out the top 10 floating desk picks that perfectly blend functionality and style, and are bound to inspire your creativity, enhance your productivity and transform any room into a dynamic, space-saving hub for both school and work.

Why a wall-mounted desk?

Wall desks offer several advantages for individuals living in apartments compared to the sometimes clunky traditional desk. One of the primary benefits is space-saving. Apartments often come with limited floor space, and wall-mounted desks can be conveniently folded up or tucked away when not in use, freeing up valuable room for other activities or furniture.

Plus, wall-mounted desks can help create a clean and uncluttered look in apartments. With a traditional desk, you may have to contend with visible cords, storage solutions and a cluttered work environment, which can lead to an unfocused mind. Wall-mounted desks often come with built-in cable management systems, reducing the visual clutter and contributing to a more organized and aesthetically pleasing living environment.

Additionally, these desks encourage minimalism by limiting the available workspace, which can inspire residents to stay organized and focused, promoting more efficient use of their apartment space. Overall, wall-mounted desks are a practical and stylish choice for apartment dwellers seeking to maximize their space and maintain a tidy living area.

Creative wall desk solutions: 10 favorites for school and work

This handpicked collection ranges in colors and sizes, perfect for adding to your already carefully crafted space. While these desks can’t promise you’ll complete that assignment or close the important sales deal, they can ensure you’ll be comfortable and stylish doing so.

This industrial ladder desk with storage space

Source: Amazon

This wooden ladder-turned desk is a beautiful addition to your wall space. The blend of functionality with industrial style is perfect for working in a stylish space and having extra storage options for work or school-related supplies.

This rustic-style floating desk

Source: Amazon

This floating desk, which fits the aesthetic of dark academia perfectly, is a unique twist on a traditional wall-mounted desk. The dark wood and retro pipe details are sure to bring a unique vibe to your office room, infusing it with an air of scholarly sophistication.

The clean-cut modern wall addition might be the perfect match

Source: Amazon

Whether you’re a student or a working professional, you’re carrying a lot of supplies with you. From laptop chargers to notebooks and pens, all items are necessary, but finding their home is tricky. This clean-cut desk creates a nook for the items you need most when you’re working or studying.

The multifunctional dream desk suits a small space

Source: Amazon

For those who have a smaller office space or may not even have a designated office area, this compact wall desk is a game-changer. Its clever design is perfect in minimal space, making it an ideal choice for cozy apartments, dorm rooms or any nook you want to transform into a productive workspace.

This collapsable wall-mounted desk

Source: Amazon

For the option of a standing desk, look no further. This no-chair-required collapsable desk is a great option for a quick study session or sending a last-minute email, offering an alternative that promotes better posture and energy during those busy work or study moments.

This perfect desk addition to storage furnishings

Source: Amazon

For those who already have a built-in storage set, this wall desk is perfect for seamlessly integrating into your existing furniture layout. Its sleek design complements rather than competes with your storage solutions, making it an ideal addition to an organized and clutter-free workspace.

This mid-century modern desk checks all the boxes

Source: Amazon

Available in four colors, at-home workers or studiers have their choice when it comes to selecting the mid-century modern desk of their dreams. The design features two cabinets that offer hidden yet stylish storage cabinets for all your office supplies.

The simple, natural wall-mounted desk

Source: Amazon

Some prefer their workspaces to just be simple and don’t require storage for their supplies either. Behold, this simple wooden wall desk, a minimalist’s dream that encourages a clutter-free, distraction-free environment for focused productivity.

The desk for your resident creative

Source: Amazon

Not all desks are used for school work and office duties, especially when you have a more creative job or a creative little one running around. This flex desk is perfect for Saturday morning doodles but is also ready to handle Monday’s workload. Its adaptability makes it a valuable addition to any dynamic workspace (or play area).

This bookshelf desk hybrid

Source: Amazon

Maximalists and decorators alike, rejoice! This bookshelf desk hybrid is perfect who want to infuse their workspace with personality and style. With ample shelving space for showcasing your favorite decor items, it’s a functional masterpiece that elevates your workspace aesthetics to new heights.

Your wall desk is the key to an inspired workstation

Whether you’re seeking a minimalist oasis for focused productivity or a creative haven for Saturday morning doodles, there’s a desk that perfectly suits your individual needs. As remote work and virtual learning continue to redefine our work and study environments, the desk you choose becomes more pivotal than ever in ensuring comfort, functionality and a touch of aesthetic delight.

Still looking for that perfect apartment where you’ll work from home and create good memories? Find the perfect place in one of our available apartments for rent.

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Source: apartmentguide.com

Apache is functioning normally

Apache is functioning normally

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Available inventory of homes for sale is on the rise in late September, which is very unusual for this time of year. In fact, inventory is growing faster than this time a year ago.

This is a demand-driven slowdown, because new listings supply is still running 9% to 10% fewer homes for sale each week than this time last year. We’re seeing fewer new sellers each week, but inventory is building as homebuyers wait to see if mortgage rates will come down to make purchases more affordable. 

What’s happening with inventory?

Fewer new sellers also means that inventory can’t grow too much; the real trouble develops when demand drops and supply surges. There’s no supply surge, but there is a notable demand drop. Consumers are very sensitive to changes in mortgage rates, and rates are still rising. 

We can see these slowing changes build up each week. It’s a pretty sharp change from what was a surprisingly strong first half of the year. There are now 528,000 single-family homes on the market. That’s an increase of 1.8% from last week. 

Normally by this point in September, available inventory is declining slightly each week. It’s late in the summer, so normally new listing volume drops as the last few sales of the peak summer months are concluding.

The fact that inventory grew by nearly 2% this week and last week is telling of how homebuyers are reacting to the highest mortgage rates in over two decades. 

In this chart of each year’s inventory curves, you can see that the number of homes on the market is climbing faster now than this time last year. This year is the dark red curve, and last year the light red. Mortgage rates continue to climb, so there is no immediate relief for homebuyers on the horizon either.

At this point, it looks like we may see inventory grow to the end of October like we did last year. Look at the divergence in the curves from this year and the tan line from two years ago when we were still in the middle of the pandemic housing boom and record-low mortgage rates.

Pending-home sales continue to lag

New pending sales each week continue to run 10% to 15% below last year’s pace. If you follow the National Association of Realtors when they publish their existing-home sales report each month, you know that the latest report for August showed a sales pace of only 4 million seasonally adjusted annual home sales.

We can already see in the NAR data that there are no signs of improvement for the sales count through September and October. The home sales that are in contract now will close mostly in October. It’s not hard to imagine that next month’s seasonally adjusted home sales data from NAR will come in under 4 million. 

In this chart, each bar is the total number of home sales pending on any given week. The shorter the bar, the fewer sales that are in progress. The light portion of the bar is the count of new pendings each week.

There are now 344,000 single-family homes in contract to close in the next couple months. That’s 14% fewer than last year and almost 30% fewer than in September of 2021.

Home sales are limited by the decreased demand, of course, and they’re also limited by the very low supply of new listings. You can’t buy what’s not for sale.

We’ve been talking all year about the market being supply constrained. Right now, sales are limited by declining demand from still-climbing mortgage rates.

Price reductions climb again

We can see the impact of weaker demand starting to creep into the pricing indicators. In the chart below, we look at the leading indicator of this trend: price reductions. This is the percent of homes on the market that have taken a price cut from their original list price. 

For a while earlier this year, demand was exceeding supply in residential real estate, and you could measure that demand with the price-reductions curve improving each week. As mortgage rates lurched over 7% to their new highs, suddenly there are fewer offers.

And home-price reductions are climbing again, with 37% of the market taking a price cut. That’s more than any recent year except last year at this time. Price reductions are accelerating now, which bodes negatively for future sales prices.

A normal, balanced market will have 30% to 35% of the homes for sale that have reduced their asking price in recent months. As this dark red line approaches 40%, that’s a clear indicator that buyers are making fewer offers. Remember, the slope of this line captures how many properties are taking new price cuts each week. And this slope is increasing now.

These are transactions that will happen in the future, so it implies sales price weakness in the fourth quarter, which you’ll hear about in the headlines after the new year. But you can see it in the data now.

The median sales price of single-family homes in the U.S. right now is $440,000. That’s down 1% from last week and it’s just a tiny fraction higher than this time last year.

We can see the pressure on home prices in recent weeks. Home prices step downward in September for the seasonal change every year, and you can detect strength or weakness relative to changes in other years.

What we see now is that year-over-year price gains are just barely positive. And the comparison is getting weaker, not stronger, as our current mortgage markets deteriorate. There are fewer offers, and those that do happen are doing so at slight discounts each week. 

Last year at this time, there were big price discounts being applied. So, our October comparisons may get slightly easier, but I sure haven’t seen any signals of price strength now.

Looking ahead to the end of 2023

So the question is will Q4 this year be a little better than Q4 2022? The median price of the new listings is fractionally higher than last year at $398,500. It will be fascinating to watch the light colored line here over the next couple weeks.

The new listings are where you see price weakness first. And last year, they were already headed lower.

The price of the new contracts this week came in at $370,000. These are the pending-home sales that went into contract in the last week. Prices of the homes going into contract are lower than last year by a fraction.

The next few weeks will be interesting to track this stat, too. Last year in mid-September is when mortgage rates jumped from 6% to 6.5% to 7.5%. By early October, any offers that were made for purchases came in at notably lower price points.

By September 2022, new pending-home sales prices fell by 3% per week. Will that happen again? Mortgage rates are even higher now than they were last year.

In this chart, you’ll notice the light-colored line started a big decline during this week in 2022. That’s when buyers reacted to newly increased mortgage rates. So, we’re watching to see where the new contracts come in over the next few weeks.

The macro trends impacting mortgage interest rates and the Fed have not given us any reprieve yet. The signals are that mortgage rates are still headed higher.

Consumer expectations for future mortgage rates have moved higher, too, so potential homebuyers are less optimistic than they were at the start of the year. And that’s what we’re seeing in the data each week now.

However, it’s important to point out that while buyer demand has backed off this fall, there is still no sign of any surge in new supply coming to the market. It can be very easy to focus on the negative momentum.

People on the fence should also know that while their competition is lessening, there’s no sign of an inventory flood. That may be an important factor in their home-buying decisions.

Mike Simonsen is president and founder of Altos Research.

Source: housingwire.com

Apache is functioning normally

Apache is functioning normally

Wachovia said today that it will discontinue wholesale loan origination beginning this Friday, leaving very few players in the broker-originated space.

It’s unclear how many jobs will be lost as a result of the shift in operations, but that will likely be disclosed when the company announces second quarter results tomorrow.

It is assumed that loans already locked and in progress will continue to be processed until a certain funding cut-off date.

Tim Wilson, Head of Loan Origination for Wachovia Mortgage, explained that the bank and mortgage lender was repositioning itself to work with clients who have existing relationships and live in areas where the bank’s franchises are located.

The Charlotte-based bank’s third-party origination unit Vertice is apparently not affected by the changes, and will continue to offer broker-originated loans.

Wachovia has been hard-hit by the ongoing mortgage crisis, especially after acquiring option arm specialist Golden West for a staggering $25 billion in 2006.

The company has since stopped originating option arms with the negative amortization feature, and has waived prepayment penalties tied to the so-called toxic loans.

In early June, Wachovia said it would contact all portfolio loan applicants whose loans were submitted by mortgage broker clients in what it referred to as “enhanced customer service”.

The bank is expected to report a second quarter loss in the range of $2.6 billion to $2.8 billion, according to Reuters estimates.

That includes a $4.2 billion increase in loan-loss reserves, with $3.3 billion going towards those nasty pick-a-pays.

Shares of Wachovia slipped 71 cents, or 5.37%, to $12.52 in after hours trading.

Source: thetruthaboutmortgage.com

Apache is functioning normally

A couple of closely followed mortgage rates sank over the last seven days. Average 15-year fixed mortgage rates climbed, while average 30-year fixed mortgage rates shrank, while The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, decreased.

As inflation surged in 2022, so too did mortgage rates. To rein in price growth, the Federal Reserve began bumping up its federal funds rate — a short-term interest rate that determines what banks charge each other to borrow money. By making it more expensive to borrow, the central bank’s goal is to reduce prices by curtailing consumer spending.

During its July 26 meeting, the Fed initiated a 25-basis point (or 0.25%) hike to its federal funds rate, marking its 11th increase in the current rate hiking cycle. The most recent increase could have an impact on mortgage rates, but experts say the markets may have already factored it into rates.

About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.

“Mortgage rates will continue to ebb and flow week to week, but ultimately, I think rates will stick to that 6% to 7% range we’re seeing now,” said Jacob Channel, senior economist at loan marketplace LendingTree.

The Fed doesn’t set mortgage rates directly, but it does play an influential role. Mortgage rates move around on a daily basis in response to a range of economic factors, including inflation, employment and the broader outlook for the economy. A lower inflation rate is good news for mortgage rates, but the potential for additional hikes from the central bank this year will keep upward pressure on already high rates.

Rather than worrying about mortgage rates, though, homebuyers should focus on what they can control: getting the best rate they can for their financial situation.

To increase your odds at qualifying for the lowest rate available, take the steps necessary to improve your credit score and to save for a down payment. Also, be sure to compare the rates and fees from multiple lenders to get the best deal. Looking at the annual percentage rate, or APR, will show you the total cost of borrowing and help you make an apples-to-apples comparison among lenders.

30-year fixed-rate mortgages

The average 30-year fixed mortgage interest rate is 7.55%, which is a decrease of 1 basis point from seven days ago. (A basis point is equivalent to 0.01%.) The most common loan term is a 30-year fixed mortgage. A 30-year fixed mortgage will usually have a greater interest rate than a 15-year fixed rate mortgage — but also a lower monthly payment. Although you’ll pay more interest over time — you’re paying off your loan over a longer timeframe — if you’re looking for a lower monthly payment, a 30-year fixed mortgage may be a good option.

15-year fixed-rate mortgages

The average rate for a 15-year, fixed mortgage is 6.80%, which is an increase of 1 basis point from the same time last week. Compared to a 30-year fixed mortgage, a 15-year fixed mortgage with the same loan value and interest rate will have a bigger monthly payment. However, as long as you’re able to afford the monthly payments, there are several benefits to a 15-year loan. These include typically being able to get a lower interest rate, paying off your mortgage sooner, and paying less total interest in the long run.

5/1 adjustable-rate mortgages

A 5/1 adjustable-rate mortgage has an average rate of 6.53%, a downtick of 3 basis points compared to a week ago. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But changes in the market could cause your interest rate to increase after that time, as detailed in the terms of your loan. For borrowers who plan to sell or refinance their house before the rate changes, an adjustable-rate mortgage could be a good option. Otherwise, changes in the market mean your interest rate may be significantly higher once the rate adjusts.

Mortgage rate trends

Mortgage rates were historically low throughout most of 2020 and 2021, but increased steadily throughout 2022 as the Federal Reserve began aggressively hiking interest rates. Now, mortgage rates are well above where they were a year ago. What does this mean for homebuyers this year?

“Mortgage rates have hovered in the 6% to 7% range for the past 10 months. Though home prices have softened slightly nationally, the still-high cost of borrowing means hopeful home buyers have felt little relief,” said Hannah Jones, economic research analyst at Realtor.com.

However, if inflation continues to decline and the Fed is able to hold rates where they are and eventually cut them, mortgage rates are likely to decrease slightly in 2023. However, they’re highly unlikely to return to the rock-bottom levels of just a few years ago.

The most recent housing forecast from Fannie Mae calls for the average 30-year fixed mortgage rate to close out the year at around 6.6%.

“Mortgage rates have been volatile for some time now and while they could eventually start trending down over the next six months to a year as inflation growth continues to cool, their path is probably going to be bumpy,” Channel said.

We use information collected by Bankrate to track changes in these daily rates. This table summarizes the average rates offered by lenders across the US:

Today’s mortgage interest rates

Loan term Today’s Rate Last week Change
30-year mortgage rate 7.55% 7.56% -0.01
15-year fixed rate 6.80% 6.79% +0.01
30-year jumbo mortgage rate 7.58% 7.58% N/C
30-year mortgage refinance rate 7.73% 7.75% -0.02

Rates as of Sept. 18, 2023.

How to find personalized mortgage rates

To find a personalized mortgage rate, speak to your local mortgage broker or use an online mortgage service. Make sure to take into account your current finances and your goals when trying to find a mortgage.

Specific mortgage interest rates will vary based on factors including credit score, down payment, debt-to-income ratio and loan-to-value ratio. Generally, you want a good credit score, a higher down payment, a lower DTI and a lower LTV to get a lower interest rate.

The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider additional factors such as fees, closing costs, taxes and discount points. Make sure you speak with a variety of lenders — like local and national banks, credit unions and online lenders — and comparison shop to find the best mortgage loan for you.

What is a good loan term?

One important consideration when choosing a mortgage is the loan term, or payment schedule. The loan terms most commonly offered are 15 years and 30 years, although you can also find 10-, 20- and 40-year mortgages. Mortgages are further divided into fixed-rate and adjustable-rate mortgages. For fixed-rate mortgages, interest rates are fixed for the life of the loan. Unlike a fixed-rate mortgage, the interest rates for an adjustable-rate mortgage are only the same for a certain amount of time (commonly five, seven or 10 years). After that, the rate changes annually based on the current interest rate in the market.

One thing to think about when choosing between a fixed-rate and adjustable-rate mortgage is the length of time you plan on living in your home. For people who plan on living long-term in a new house, fixed-rate mortgages may be the better option. While adjustable-rate mortgages might have lower interest rates upfront, fixed-rate mortgages are more stable over time. If you aren’t planning to keep your new home for more than three to 10 years, though, an adjustable-rate mortgage may give you a better deal. There is no best loan term as a general rule; it all depends on your goals and your current financial situation. Be sure to do your research and know what’s most important to you when choosing a mortgage.

Source: cnet.com

Apache is functioning normally

Many people were thrown into financial turmoil at the beginning of the COVID-19 pandemic. Previously secure jobs disappeared, and monthly payments went from affordable to impossible overnight. A year later, borrowers are still catching up—and some are struggling to make ends meet. So, if you can’t afford your car payment, what are your options?

We have eight solutions to an unaffordable car loan in this article. Some are easier to implement than others—and some come with long-term credit implications:

  1. Modify Your Auto Loan
  2. Refinance Your Vehicle Loan
  3. Trade in Your Car
  4. Let Someone Else Assume Your Loan
  5. Sell Your Vehicle
  6. Turn the Keys In
  7. Let Your Car Be Repossessed
  8. File for Bankruptcy

1. Modify Your Auto Loan

How can you lower your car payments without refinancing? Before you do anything else, speak to your lender about modifying your auto loan. Call your auto loan company as soon as you can, and tell them about your financial troubles. Ask if they have any relief options for borrowers, including loan modifications.

Many lenders made changes to their modification policies in response to the COVID-19 pandemic. Temporary loan forbearance and extension programs, for instance, help borrowers get back on track. 

Perhaps surprisingly, many lenders let borrowers in good standing pause their auto loans for a month once a year. Of course, you’ll have to make an extra payment at the end of your loan term to make up the difference—and you might have a little extra interest to pay.

2. Refinance Your Vehicle Loan

How do you get out of a car loan you can’t afford? The answer might be to refinance your vehicle. If you have a good payment history and a strong credit profile, use it to your advantage. Here are two ways to play the refinancing game:

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Let’s imagine you bought your car for $20,000 two years ago. Your original 60-month auto loan came with a 5.5% interest rate, and your monthly payments are $382.02. Your current loan balance is $12,600.

If you extend your loan by five years, your monthly payments will drop to $241. You’ll have $141 more spending money each month—but you’ll pay more in interest over the life of your loan, plus you’ll have to make payments for a longer time period.

3. Trade in Your Car

If you can’t afford your car payment any more, consider trading in your vehicle. Think about your automotive needs—could you get away with a smaller car, for instance? Do you need a truck, or would it be easier to park a sedan in your driveway? 

Swapping your SUV for a smaller model isn’t just environmentally friendly—it’ll also cost less to run. Switching from a new luxury vehicle to a slightly older regular brand auto, on the other hand, could cut your insurance bill significantly. Either choice will reduce your car payment.

If you do decide to trade in your car, get quotes from several dealerships. Then, negotiate a fair price with your favorite dealership and choose an alternative vehicle. If you’re not upside-down in your current loan—if you don’t owe more than it’s worth—you might even be able to trade upto a newer vehicle with better loan terms.

4. Let Someone Else Assume Your Loan

Some loans and leases are “assumable,” which means that they’re transferable from one party to the next. If you can’t make your loan payments any more but you want to avoid damaging your credit, consider passing the loan, and the vehicle, to someone else. 

Before you agree to pass your car on, talk to your lender. Most lenders have minimum credit and income requirements for buyers—and the person you transfer your vehicle to will need to meet these terms. 

5. Sell Your Vehicle

Do you need a vehicle right now, or can you use public transportation until your finances settle? If buses or trains are an option in your area, consider selling your vehicle privately and using the money to pay off the remainder of your loan. Doing so could help you escape a car payment altogether—plus private sales nearly almost generate more money than dealer trade-ins. 

6. Turn the Keys In

Can you give your car back to the finance company? You sure can! Also called “voluntary repossession” or “voluntary surrender,” walking away from your vehicle is a last-resort option if you can’t refinance or sell your car.

Unfortunately, there are consequences associated with turning in your keys. On the one hand, the repo man won’t pay you a personal visit, which can save embarrassment. On the other, the lender might still try to collect money from you if you owe more than they can get for the vehicle at auction. A voluntary repossession will also show up on your credit report.

If you do decide to turn your keys in, contact your lender and tell them your intentions. Your lender will guide you through the process and let you know when and where to hand over your car.

7. Let Your Car Be Repossessed

The alternative to voluntary surrender is straight repossession. This option is perhaps the most stressful, and it can severely affect your credit. In a nutshell, you simply wait until you’re so behind with payments that your lender decides to repossess the vehicle. Then, your car—and anything you leave inside—is towed away. You might want to consider this as a last option—carefully look at your resources and consider exhausting your other options before you decide.

8. File for Bankruptcy

If you’re in a huge financial hole and you owe a lot of money beyond your car payment, you could consider bankruptcy. Bankruptcy is complicated and can pull your credit down for a decade, so it’s not an option to consider if there are any alternatives open to you. Before proceeding, take a good look at your finances and contact a well-regarded bankruptcy attorney. 

Take Care of Your Finances with Credit.com

Whatever you decide to do, it’s important to keep track of your credit. Sign up with Credit Report Card to view your Experian VantageScore 3.0 and see a helpful credit snapshot, which you can use to create a financial plan.

Source: credit.com