Inflation continued to rise in August, while price pressures are likely to have peaked. Read on pals, to know the possible outcome this might have on consumer spending.

Mortgage Rates Ascend as Refinance Demand Drops 10%

According to the Mortgage Bankers Association’s seasonally adjusted index, Mortgage demand has been impacted by a substantial increase in mortgage interest rates during the last few weeks as total application volume declined nearly 7% last week compared to the prior week. 

Refinance demand, which is particularly sensitive to weekly interest rate changes, dropped to its lowest in three months last week, down 10% from the previous week. The volume was down 16 percent from the same period a year ago. Mortgage applications for home purchases fell 2% this week.

Study: 24% of sellers received four or more offers in 2021

According to Zillow’s newest consumer housing trends study, about a quarter of property sellers in the United States received four or more offers on their homes in 2021. The higher frequency of bidding wars in 2021 reflects the rise in the number of homes that received multiple offers. The average seller received two bids, which is consistent with the previous three years.

The report, collected by Zillow Group Population Science through a national survey of more than 2,000 sellers, found that the percentage of offers that fell through was slightly higher than in previous years, with 56 percent of sellers reporting that none of the offers on their property fell through, compared to 58 percent in 2020.

U.S. Consumer Spending Increases; Inflation Eroding Households’ Buying Power

In August, consumer spending, which accounts for more than two-thirds of all economic activity in the United States, increased by 0.8 percent. As a result, the data for July was revised down to indicate a 0.1 percent decrease in spending rather than the 0.3 percent increase previously reported.

Inflation continued to rise in August, while price pressures are likely to have peaked. After gaining by the same margin in July, the personal consumption expenditures (PCE) price index increased by 0.3 percent, excluding the volatile food and energy components. The so-called core PCE price index grew 3.6 percent in the year to August, mirroring July’s gain. With the August and July statistics in hand, experts anticipated that consumer spending growth in the third quarter would likely slow to approximately 1% in the third quarter

Next weeks potential market moving reports are:

  • Monday, October 11th – No Reports
  • Tuesday, October 12th – Small Business Index, Job Openings
  • Wednesday, October 13th – Consumer Price Index
  • Thursday, October 14th – Initial Jobless Claims, Continuing Jobless Claims
  • Friday, October 15th – Consumer Sentiment Index, Business Inventories

As your mortgage and real estate professional, I am happy to assist you with any information you may need regarding mortgage or real estate trends.  I welcome the opportunity to serve you in any way I possibly can. Please feel free to reach me at (800) 216-1047.

Should I Start Refinancing My 30-Year Fixed Mortgage Soon Or Should I Aim For A Shorter-Term Mortgage? Need A Sound Advice Now.

If you can reduce your mortgage payments by refinancing and lock in a payment you know you can afford, you should consider refinancing. Here are a few financial tips for mortgage refinance that fit the current financial climate:

Do you have high-interest debt you’re working to pay off?

You may owe $10,000 or $20,000 in credit card debt. Have you looked at the difference between how much you’re paying in interest and how much on the balance you owe? You may find that 50, 60, and even 80 percent of your monthly payment is paying interest. 

Using a mortgage refinance to pay off high-interest debt with a low-interest 30-year fixed-rate mortgage could save you thousands of dollars. Refinancing your mortgage to pay off high interest credit card debt may be a lot of work but your financial result will be worth it. 

Do you have student loan debt you want to eliminate?

Student loan interest rates may not be quite as high as high-interest credit cards, but the average unsubsidized student (or parent) loan starts at 6 percent interest and can go up from there. Similar to credit card debt, you can save money on interest by refinancing to a lower-interest 30-year fixed rate mortgage.

Can you reduce your monthly mortgage payment?

Lowering your monthly mortgage payment is one of the best reasons to refinance. If you can locate a loan which has a lower annual percentage rate (APR) than your current loan, it’s worthwhile to investigate your refinancing options.

Can you afford a shorter-term mortgage?

If your finances have improved significantly since you got your initial mortgage, you may benefit financially from refinancing from a 30-year fixed mortgage to a 15-year loan term, or any other term such as 27 year, 25 year, 21 year, 18 year etc.  The options are limitless with a savvy independent mortgage broker on your side. The savings in interest can be substantial. 

For example, if you have a $500,000 30-year fixed rate mortgage at 4 percent, you’ll pay approximately $859,300 in principal and interest over the course of your loan. If you refinance your loan to a 15-year mortgage, even at the same 4 percent interest, your total payments will be $665,719. That’s a difference of almost $200,000.

Refinancing your 30-year fixed rate mortgage can be a smart financial decision for a lot of reasons. An experienced independent mortgage loan broker such as California Platinum Loans can let you know what your options are so you can make the right financial decision.

Sources

https://www.cnbc.com/2019/08/09/millennials-drive-mortgage-refinance-boom-and-lenders-are-scrambling.html

https://www.nerdwallet.com/blog/loans/student-loans/student-loan-interest-rates/

 

Have You Ever Heard Of A Financial Advice to Only Get a 15-Year Mortgage? Is a 15-Year, Fixed-Rate Mortgage Right for You?

You may see financial advice that encourages you to take out a 15-year mortgage in preference to a 30-year fixed rate mortgage. The reasons for this advice vary, but include lower amount of interest paid over the course of the loan, paying off your house sooner, and building equity in your home more quickly. Advisers base most of their articles on a $200,000 mortgage. In a higher housing cost area or one where prices are rising quickly, does this advice hold true in all cases?

You’ll pay less interest over the course of your loan with a 15-year mortgage

This is true if you plan on staying in your home for 15 years or longer. Over the course of a 15-year, $500,000 mortgage at a fixed 4% interest rate, you’ll pay about $167,000 in interest over 15 years. A 30-year fixed-rate mortgage at 4% interest will cost you about $193,000 more in interest over the course of 30 years. But these figures make the most sense if you plan to stay in the same home and same mortgage.

You’ll build equity in your home faster

While you start to pay your principal down on your home faster with a 15-year fixed rate mortgage, you can also make additional house payments on a 30-year mortgage to help build equity. You should think about the uses of home equity in your overall financial plan. Equity in your home is valuable if you want to apply for another type of loan, including a home equity line of credit (HELOC) or a business loan. 

You’ll pay off your house in half the time

This is completely true: a 15-year mortgage will pay off your house twice as fast as a 30-year mortgage. If your goal is to own your home and stay in it, then paying off the mortgage as quickly as possible is a clear financial choice.

You don’t have to limit your choices to a 15-year or a 30-year fixed rate mortgage. You can choose other amortization terms, including a 10-year mortgage, or adjustable rate mortgages (ARMs) with varying terms. A qualified and experienced mortgage professional can help you to decide which mortgage terms are right for you. Talk with one today to learn what your best home loan options will be.

Sources

https://www.daveramsey.com/blog/why-daves-against-30-year-mortgages