Mortgage Rate – Sznurki Tue, 12 Oct 2021 06:33:39 +0000 en-US hourly 1 Mortgage Rate – Sznurki 32 32 How to increase mortgage rates without increasing them? | Greg Jericho Mon, 11 Oct 2021 22:41:00 +0000

TThose lucky enough to be able to afford a home loan will now have to prove that they can pay 3% more than the interest rate offered by the bank. This is a new measure ironically introduced not to ensure that people will be able to pay when fares go up, but because fares aren’t about to go up at all.

What happens when the spot rate is 0.1% and the average mortgage rate of 3.03% is much lower than anything seen in the past 60 years?

As we all know, house prices are skyrocketing.

This surge means that we are on the verge of breaking the record for the level of housing debt relative to income:

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This is not something sustainable given our weak economy, but if you are the Reserve Bank, you do not want to raise interest rates to stop the price rise, as that will also raise mortgage rates for loans. companies and it would hurt the same weak economy. .

How do we know the economy is weak? Well, for a start the cash rate is 0.1% and the government just ran a deficit of $ 134 billion and is expected to generate another of around $ 100 billion this year.

This only happens when things are not going well. Despite all of these massive stimulus measures, wages are still barely rising to 2% and the RBA does not expect inflation to exceed 2.5% until at least 2023.

And yet house prices are skyrocketing.

So what to do?

The answer is macroprudential tools.

These are measures by which central banks and regulators attempt to tighten monetary policy without raising interest rates.

Often, they are introduced because of concerns about the instability of the financial system.

For example, the first macroprudential tool introduced in Australia was the Australian Prudential Regulation Authority (Apra) telling banks in 2014 that annual growth in investor credit exceeding 10% would be considered a “significant risk indicator” (i.e. that is, this must not happen).

But for the moment, credit growth is far from 10%:

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The concern now is housing prices. They fly away and yet the RBA cannot raise its rates for fear of giving the rest of the economy a boost.

Instead, Apra announced that banks should ensure that borrowers are able to afford a home loan if interest rates rise 3% instead of the old “buffer” of 2.5. %.

In fact, it raises interest rates without doing so.

Right now, the average homeowner’s mortgage rate paid is 3.03% (and if you’re paying more than that, call your bank and ask for a rate cut):

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If you live in New South Wales, that means for a 25-year loan on an average mortgage of $ 750,784, your monthly payments are $ 3,573.

In the past, however, banks would have verified that you had the capacity to pay $ 4,624 per month – because that’s the 5.53% (3.03 + 2.5) payback. Now the banks will check if you can pay $ 4,852 – 6.06% loan repayments:

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But there is actually very little chance that you will have to pay this amount.

For rates to rise by 3%, it would take a massive economic boom. Consider that during the mining boom of the early 2000s, it took six years for average mortgage rates to drop from 6.07% to 9.34%.

We’re not about to have such a boom anytime soon.

The RBA and Apra are therefore not worried that people will soon be unable to repay their loans.

But it also means the RBA (and homebuyers) know that rates won’t go up for a long time, and probably not by much even then. And this situation is ripe for a spike in house prices.

These measures therefore effectively reduce the number of people who can be approved for a loan. Because, as we know, the weaker the growth in mortgage loans, the weaker the growth in house prices.

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And so if, for example, you live in Victoria, you’ll be asked if you can afford an extra $ 1,060 per month for a 25-year loan, rather than $ 872 as was the case with a buffer of 2, 5%:

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Given that it’s only an additional $ 188 per month, it’s clear the RBA and Apra don’t want to stop borrowing massively, but just temper it.

But those higher buffers also suggest that the RBA isn’t about to hike rates – because you’re only using macroprudential tools when the other tool for raising interest rates needs to stay on the bank. tray.

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]]> 0 3 reasons to never apply for a mortgage if you don’t have emergency funds Sat, 09 Oct 2021 16:00:36 +0000

A mortgage is a major financial commitment, and it is one that you need to be sure you are prepared for. This means that you should have an emergency fund in place. Ideally, you should have enough cash on hand to cover several months of running expenses, including your new mortgage payments as well as your other essential bills.

Here are three big reasons why reaching this financial milestone is so important before you apply for a mortgage and become a homeowner.

6 simple tips to get a 1.75% mortgage rate

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1. You could risk foreclosure

Without emergency funds, an income interruption due to job loss or a medical problem could rob you of the money you need to make your mortgage payments. If this happens to you, the lender could go ahead with the foreclosure.

Since a mortgage is secured debt, mortgage lenders have the option to foreclose on your home if they force you. You could lose your home and most, or all, of the investment you made in it. You could also severely damage your credit, affecting all of your financial options for the foreseeable future.

An emergency fund helps ensure that even if something goes wrong, you can keep paying your lender until you get back on your feet.

2. You could face a lot of financial stress

Worrying about missing a mortgage payment can keep you awake at night. You don’t want to find yourself constantly stressed about losing your job or having unforeseen costs that make it impossible to pay your lender.

When you have an emergency fund, you have peace of mind. You will know that even if something goes wrong, you can keep a roof over your head. You don’t have one yet? Use this emergency fund calculator to help you get started building your emergency savings.

3. You may not have the means to maintain the value of your home

As a homeowner, you’re responsible for more than just making monthly mortgage payments. You should also perform routine maintenance tasks and make major repairs if something goes wrong. With no homeowner to call, you’ll be the one who has to pay the plumber, replace appliances or redo the roof. And things can go wrong even with newer homes.

If you don’t have the money to handle the expenses of home ownership, you could find yourself in a tough spot where little problems turn into big or the structural integrity of your home is compromised. If this happens, you could find yourself underwater on your mortgage or owing more than the value of your house in its disrepair.

The problem is, not only are you reducing the value of your real estate investment and making your home less livable, you might also find yourself unable to sell your home enough to pay off your loan if you need to. You don’t want that to happen, and an emergency fund can help you make sure of this since you can use that fund to pay for necessary repairs.

As you can see, an emergency fund is crucial for your peace of mind and your financial future. Make sure you have one before applying for a home loan.

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Home price gains to decline in 2022, real estate agents forecast – Orange County Register Thu, 07 Oct 2021 19:02:27 +0000

California’s white-hot housing market will cool down in 2022, with price increases moderating and sales falling, the California Association of Realtors forecast Thursday, October 7.

But the inability of most buyers to afford the ever-rising home prices in California will continue to plague the state, driving out even more residents of the state.

A CAR consumer survey showed, for example, that 35% of home sellers leave the state and less than 15% move to a house in the same county as their last residence.

“I think the pressure to migrate out of state is going to be just as strong, if not stronger, as housing, affordability gets worse,” said CAR chief economist Jordan Levine. “I think this is a housing phenomenon, and we don’t have a lot of relief in terms of housing affordability.

The 2022 median price of a California home, or the price in the middle of all sales, will be $ 834,400, up just 5.2% from the projected median of $ 793,100 this year, according to forecasts. next year.

Related: Peak housing streak cools as some buyers balk at sky-high prices

Price increases have been in double digits over the past two years, increasing 11.3% in 2020, with an expected increase this year of 20.3%. The median price of an existing single-family home has increased by over $ 200,000 over the past two years, or nearly $ 2,000 per week.

Sales are expected to fall 5.2% next year, with a total of 416,800 homes changing hands, according to forecasts.

Even though sales will decline, next year’s transaction volume is still expected to be the second highest in the past five years. And it will be slightly above the average of 414,000 transactions per year since the housing market began to recover from the Great Recession in 2012.

“We can’t call it a cool market by any stretch of the imagination,” Levine said. “I would say it’s gone from white heat to that kind of boring old and ordinary (market) scorching that California usually has, (with) too much demand and not enough supply.”

Rising mortgage rates, a limited supply of homes for sale and a lack of affordable housing for most buyers “are likely to dampen the growth in median prices,” according to forecasts. But demand will always exceed supply, creating more “upward pressure” on prices.

“The structural challenges will reaffirm themselves,” Levine said. “The demand for housing will continue to exceed the available supply as the economy improves, leading to higher house prices and slightly lower sales.”

In a statement, CAR President Dave Walsh said the slight decline from the scorching sales pace of the past 1.5 years “will be a welcome relief for potential buyers.” The stiff competition in the market and the lowest stock in at least eight years has “pushed (the buyers) out of the market,” Walsh said.

CAR economists predict that the average interest rate for a 30-year fixed-rate mortgage will rise to 3.5% in 2022, from 3% this year. So far this year’s rate has averaged 2.9%, but is expected to increase by the end of the year.

After 10 straight years of steadily rising home prices, the typical California home will be affordable for just 23% of California households, according to forecasts. That’s down from 32% in 2020 and a projected rate of 26% this year.

“The erosion of housing affordability is starting to take its toll on buyers, so we expect demand to fall a bit,” Levine said.

CAR’s overall economic outlook is more optimistic, forecasting state unemployment in the state to fall to 7.8% this year and 5.8% next year. The rate, which was below 4% just before the start of the pandemic, rose to 16.4% in the spring of 2020.

The country’s economy is also expected to continue growing next year. Gross domestic product is expected to reach 4.1% in 2022, in addition to a projected gain of 6% in 2021.

“Assuming the pandemic situation can be brought under control next year, the cyclical effects of the last economic downtown will subside and a strong recovery will follow,” Levine said.