Mortgage rates ease for Wednesday

Several key mortgage rates dropped today. The average rates on 30-year fixed and 15-year fixed mortgages both tapered off. The average rate on 5/1 adjustable-rate mortgages, or ARMs, the most popular type of variable rate mortgage, also declined.

Mortgage rates change daily, but, overall, they are very low by historical standards. If you’re in the market for a mortgage, it could make sense to go ahead and lock if you see a rate you like. Just make sure you shop around first.

30-year fixed mortgages
The average rate for a 30-year fixed mortgage is 4.27 percent, down 3 basis points over the last seven days. A month ago, the average rate on a 30-year fixed mortgage was higher, at 4.35 percent.

At the current average rate, you’ll pay principal and interest of $493.11 for every $100,000 you borrow. That represents a decline of $1.76 over what it would have been last week.

You can use Bankrate’s mortgage calculator to estimate your monthly payments and see how much you’ll save by adding extra payments. It will also help you calculate how much interest you’ll pay over the life of the loan.

15-year fixed mortgages
The average 15-year fixed-mortgage rate is 3.69 percent, down 3 basis points from a week ago.

Monthly payments on a 15-year fixed mortgage at that rate will cost around $724 per $100,000 borrowed. That may squeeze your monthly budget than a 30-year mortgage would, but it comes with some big advantages: You’ll save thousands of dollars over the life of the loan in total interest paid and build equity much more quickly.

5/1 ARMs
The average rate on a 5/1 ARM is 3.98 percent, falling 7 basis points over the last week.

These types of loans are best for those who expect to sell or refinance before the first or second adjustment. Rates could be substantially higher when the loan first adjusts, and thereafter.

Monthly payments on a 5/1 ARM at 3.98 percent would cost about $476 for each $100,000 borrowed over the initial five years, but could increase by hundreds of dollars afterward, depending on the loan’s terms.

Open banking: the struggle behind bank-fintech partnerships

Conventional wisdom in the financial world is that large incumbent banks need to partner with smaller startup and scale-up companies for a mutually beneficial relationship that aims to foster innovation and ultimately improve services.

Recent regulatory mandates, based on the European Union’s second iteration of the Payments Services Directive as well as from the Competitions and Markets Authority (CMA) in the UK, have pushed traditional banks to open up their data and platforms, in the form of application programing interface (API) toolkits.

These APIs, mostly focused on retail current accounts, create an avenue for financial services startups to integrate their products with existing bank infrastructure more easily. The aim is to create a more competitive environment and hopefully offer increased options for consumers.  All of this is known by the umbrella term “open banking”.

The CMA directive is aimed at the top nine banks in Britain and Northern Ireland, banks such as Barclays, RBS and Lloyds Banking Group. Despite not being governed by the CMA mandate, Starling Bank, a year-old mobile-only bank in the UK is taking an aggressive approach to open banking.

According to Megan Caywood, Starling’s chief platform officer: “Starling is taking that a step further with its API and marketplace. The API goes beyond the CMA requirements and looks to surface every Starling feature via the API, such as an API for savings goals even though that isn’t mandated, and enabling accessibility tools like webhooks to make integration easier.

“The Starling marketplace goes beyond simply enabling third parties to access bank data; it enables those parties to be visible and available to customers within the Starling Bank app – it integrates the partners’ APIs as well. That’s appealing to third parties as it gives them a new customer-acquisition channel and a way to make it easier for Starling customers to access their products.”

Last month, global professional services firm Capgemini launched its World FinTech Report, along with LinkedIn and in collaboration with Efma. The overarching theme was that global fintech – financial technology startups – and traditional financial institutions and banks need to partner and collaborate. While that goal sounds good on conference panels and in blog posts, the reality is much harder to actualise.

Nektarios Liolios, founder and chief executive of Startupbootcamp FinTech, an accelerator programme for global fintech startups funded by partner banks and financial services firms, sheds some light on the lofty goal of startup-bank partnerships.

Speaking as part of a transatlantic debate, hosted by Capgemini, in association with 11.FS Media, Mr Liolios says the problem lies in the chasm between an appetite for innovation and a capacity to achieve it on the part of traditional financial services firms. Conversations on how to bridge that chasm are not happening, he says.

“How do you measure success, how do you measure what works and what doesn’t work? How do you get the business excited enough to put money towards it when the innovation budget is actually shrinking?” Mr Liolios asks.

According to Carrie Osman, founder and chief executive at CRUXY & CO, a strategic UK consultancy, many banks are now overwhelmed by the possibilities opened up by the regulations fuelling open banking. “You would think, with these regulations coming out, it would make it easier for banks. What is happening is it has made the space more crowded,” she says. “Startups are not standing out from the crowd.”

However, startups need to focus on exactly what value they will bring to a large firm and how their offering will interact with vast, enterprise-wide technology “from day one”, Ms Osman adds.

Despite the hype and noise around bank-fintech collaboration, and past struggles to make these partnerships happen, there are bright spots appearing within the financial services sector. Late last year, HSBC and their subsidiary First Direct announced a partnership with London-based fintech startup Bud. Most recently, Barclays signed a banking deal with cryptocurrency exchange Coinbase and, as part of the deal, Coinbase now has an e-money licence and access to the Faster Payments Scheme.

New Era for P2P Lending in FinTech Sector

What is Peer-to-Peer Lending –

With peer-to-peer lending, borrowers take loans from individual investors who are willing to lend their own money for an agreed upon interest rate. Peer to Peer lending is already a hugely successful model for alternate financing across the globe.

With P2P lenders coming under RBI purview, there will be better transparency in the system and higher confidence amongst participating lenders and borrowers. In the global space, P2P lending has been growing year on year in terms of both volume and number of players. Globally, USA, UK and China markets have been dominant in terms of P2P lending. In India, the industry is at very nascent stage and has limited operating history. Various reports mentioned that P2P lending will continue to grow given its current nascent stage.

In India, more than 70 percent people are rejected from availing a personal loan from bank or NBFC due to risk portfolio and most of the time loans are available only to salaried employees with annual gross salary of Rs 3 lakh or higher. However, P2P lending market place works differently, it uses multiple parameters to determine creditworthiness of borrowers and they do not decline a loan application even if the borrower’s salary is considerably low. Technology has made the process of lending and borrowing simpler to get quick cash or earn great returns. The process is initiated when the borrower applies online for a loan and post application approval, the lenders fund the loan amount.

What’s new for Borrowers & Lenders?
For borrowers, the P2P market place enables a swift application process with little documentation, faster decision-making compared to traditional financing institutions, and they also get competitive interest rates and repayment flexibility. Similarly, lenders get better return on their investment, specify risk aversion/return and get quick returns on investment.