A $30 hamburger gives insight into $65B Americans spend on junk fees every year. I ordered delivery a few times during the pandemic and one time the fees were higher than the food ($31 in fees on a $29 order). It was a nasty bait and switch and strangely I haven’t ordered from a tech delivery service since. We see this across many industries, and it can be a sneaky way to raise prices. The Biden administration looks to take on these fees across multiple industries. In Mortgage there are many laws governing the disclosure of rates and fees because many folks just look for the headline rate. When securing a mortgage, it is important to look at your short and long-term costs when considering rates and fees. There are many different ways of structuring your loan and one might be more beneficial for your individual financial plans.
Mortgage Rates increased over the past two weeks as the price of Mortgaged Backed Securities (MBS) continue to decline. Rates are up approximately 1.25% from this time last year.
Inflation- the Personal Consumption Expenditures (PCE) index rose by 0.2% in June and is down 0.8% to 3% year over year. This is the Fed’s favorite measure of inflation and a good sign for mortgage rates as inflation is the arch nemesis of mortgage rates.
Rents – Apartment List National Rent Report showed that rents rose 0.3% in July and are down 0.7% year over year, a decrease of 0.7% from last month’s report. It’s worth noting that this data includes only new leases and when you blend in renewals CoreLogic has rents up 3.4% year over year. Vacancies are at 7.3%, a 0.3% increase from last month. In the graph above you can see that the Apartment List Rental Index is a forward indicator for the CPI inflation report so we are will likely see the CPI index decline in the coming months which should also help with mortgage rates.
Jobs – the number of people filing for unemployment for the first time fell 7,000 this week to 221,000. The job market remains strong.
Loan Performance – the Core Logic Loan Performance Insights showed that mortgages continue to perform extremely well. The total percent of loans 30 or more days late is down to 2.6% a historic low and the number of loans in foreclosure continues to remain near multi-decade lows at 0.3%. Remember that over 1/3rd of homes are owned outright and not counted in this report.
Fed – the Fed members unanimously voted to hike the Fed funds rate by 25bps to 5.5%. As a reminder the Fed Funds rate is the short term, overnight rate that banks lend each other money at. It is also the benchmark for prime (Fed Funds plus 3%) which most banks use as their index for Home Equity Lines of Credit (HELOCS).
Mortgage Applications to purchase homes declined 3% last week and are down 23% year over year. Refinance applications were flat from the previous week and are down 30% year over year.