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.

These 2 brothers just declared a mortgage price war

Sweden’s mortgage industry is today worth around 3 trillion krona ($370 bn), according to Statistics Sweden, and most of the interest on these loans end up in the pockets of big banks.

A new fintech venture called enkla.com has today launched a potentially game-changing service. The Swedish online lender offers consumers a 0.95% fixed mortgage rate for three years, which is considerably less than the 1,6% average for similar loans among Sweden’s major banks, according to Di Digital.

Enkla.com doesn’t issue any new mortgages, but only targets borrowers who are willing to transfer their existing loans onto its platform. Anyone with a Swedish bank-issued mortgage of up to 5 million krona ($610 k) and a maximum loan-to-value ratio of 85% is eligible for the service.

‘’Ten years ago, someone would fill out an application at home and post it the next day. Now it’s click, click, move,’’ said Alexander Widegren, CEO of enkla.com. ‘’We have digitized and streamlined the application process and made it easier than ever for customers to take control over their mortgages.’’

Enkla’s self-stated goal is to borrow 100 billion SEK ($12,2 billion) worth of mortgages in the next 18 months by issuing mortgage bonds on the international markets, Di Digital writes. If the target is met, Enkla.com would be looking at a 3 percent share of the Swedish mortgage market.

The service is an instant hit among Swedish homeowners, according to Alexander Widegren: “We are receiving one billion krona worth of applications per hour,” he says to tech publication Breakit.

The service enters a market where Sweden’s household debt has exploded from 66 percent to 87 percent of GDP in the past decade, driven by soaring housing prices. Consumers are evidently hungry for a cheaper deal than what banks can offer. Currently, Sweden’s four biggest banks – Swedbank, Nordea, Handelsbanken and SEB – have 75 percent of the country’s mortgage market, Breakit reports.

Enkla.com takes a 0,35% cut on the mortgages. The modest fee is enabled through an automated service that screens applicants hundreds of times faster than a bank clerk would, the company says. Seeing that the borrower will already have passed a credit assessment with a bank, the burden on Enkla’s due diligence is smaller.

Alexander Widegren, a software engineer, started the service together with his brother Marcus Widegren, an ex-Lehman trader and banking industry veteran. The two are hoping to grow their service by tapping into the 20,000 homeowners who currently use Lånbyte.se, a loan restructuring service they ran prior to founding Enkla.com.

Both Lånbyte and Enkla are part of Simplex, which was founded in 2012 by Alexander Widegren and counts Collector Ventures and NFT Partners – both fintech industry specialists – as investors.

Enkla.com’s launch comes as the Swedish mortgage market is getting disrupted by new online players that undercut bank rates. Two other companies – Stabelo, backed by online broker Avanza, and Hypoteket, owned by publishing house Schibsted – have recently launched their online lending platforms, which are financed by pension- and insurance giants instead of banks.

10 cities with the best credit scores in the US

When it comes to having good credit, some cities outshine others, according to financial website WalletHub, which compared the median credit scores of residents in 2,572 U.S. cities of all sizes to determine where residents have the best — and the worst — credit ratings.

An “excellent” credit score ranges from 750 to 850, according to the two major scoring systems FICO and VantageScore, which rate credit on a scale of 300 to 850. A score from 700 to 749 is considered “good”; a score from 650 to 700 is “fair”; and a score from 300 to 649 is “bad.”

The average U.S. adult has a “fair” score of 675, according to Experian’s 2017 State of Credit report. But WalletHub, which pulled data from TransUnion, found that residents of the following 10 cities enjoyed a median score in the 99th percentile:

The Villages, Florida
Median credit score: 807

Sun City Center, Florida
Median credit score: 789

Sun City West, Arizona
Median credit score: 787

Green Valley, Arizona
Median credit score: 781

Saratoga, California
Median credit score: 780

Los Altos, California
Median credit score: 779

Lexington, Massachusetts
Median credit score: 778

Estero, Florida
Median credit score: 778

Laguna Woods, California
Median credit score: 777

Pittsford, New York
Median credit score: 773

These are primarily smaller, affluent cities, but some big cities perform well, too, WalletHub reports, including San Francisco (98th percentile), Seattle (97th percentile), Honolulu (95th percentile), San Jose (94th percentile) and Boston (92nd percentile).

A credit score is an important measure of your financial health: It signifies your trustworthiness to financial institutions. The better your score, the more likely you are to get a good deal on a home or a car, or to be able to rent an apartment. So it’s important to take steps to improve your credit where you can. Here are four things to prioritize if you’re shooting for a better score.

Home prices jump in January

home mortgage

Home prices increased in January, moving even faster than the levels of increase seen at the end of 2017, according to the latest House Price Index from the Federal Housing Finance Agency.

Home prices increased by 0.8% from December to January, the index showed. And December’s increase of 0.3% was upwardly revised to 0.4%.

The chart below showed January’s increase in home prices was the highest monthly increase since February 2017, when home prices also rose 0.8%. August came close with an monthly increase of 0.7%.

Home prices saw the most monthly increases on the coasts, both the East and West Coast.

Across the U.S., changes in home prices from December to January ranged from a decrease of 0.7% in the West South Central division to an increase of 1.2% in the New England and Pacific divisions.

Annually, all home price changes were positive, ranging from an increase of 5.1% in the West South Central division to an increase in the double digits of 10% in the Mountain division.

West South Central: Oklahoma, Arkansas, Texas and Louisiana

New England: Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut

Pacific: Hawaii, Alaska, Washington, Oregon and California

Mountain: Montana, Idaho, Wyoming, Nevada, Utah, Colorado, Arizona and New Mexico

Mortgage rates forecast for April 2018

Just months into the year, mortgage rates have already met 2018 predictions.

In late 2017, when thirty-year fixed rates were still in the high-3s, economists put rates in the mid-4s this year.

It didn’t take long.

Rates approached 4.4% by mid-February and shot past 4-year highs.

Fortunately, rates are still low by historical standards, and today’s rateshave not deterred home buyers. Home sales are up 1.1 percent from a year ago according to the National Association of Realtors.

Still, it’s no time to sit by and hope for a massive rate drop, the chances of which are slim to none. Rates available now are likely the best we’ll see in 2018, despite the recent push upward.

Freddie Mac: Mortgage rates at highest levels in more than 4 years

Mortgage rates just broke a barrier not surpassed in 220 weeks.

Since January 2014, rates had remained below 4.45%, that is, until the late stages of March, according to mortgage agency Freddie Mac.

The 30-year fixed rate average is up 67 basis points, or 0.67%, compared to lows reached in September.

What does that mean for the home buyer or refinancing homeowner? A lot.

Home buyers will pay over $100 more per month for a $350,000 home with 10% down

A homeowner looking to refinance may discover that the new loan may not yield any savings at all.

Dow Jones plunges 724 points

Wall Street has plunged over fears of a US-China trade war, after the Trump administration moved to impose tariffs on up to $US60 billion ($77 billion) worth of Chinese imports.

Markets at 7:05am (AEDT):

ASX SPI 200 futures -1.5pc, ASX 200 (Thursday’s close) -0.2pc at 5,937
AUD: 77.06 US cents, 54.6 British pence, 62.6 Euro cents, 81.2 Japanese yen, $NZ1.07
US: Dow Jones -2.9pc at 23,958, S&P 500 -2.5pc at 2,644, Nasdaq -2.4pc at 7,167
Europe: FTSE -1.2pc at 6,943, DAX -1.7pc at 12,100, Euro Stoxx 50 -1.7pc at 3,342
Commodities: Brent crude -0.8pc at $US68.90/barrel, spot gold -0.2pc at $US1,328.81/ounce
Mr Trump signed a presidential memorandum that will target the Chinese imports but only after a consultation period.

China will have space to respond, reducing the risk of immediate retaliation from Beijing.

Mr Trump said the move was intended to punish China for alleged intellectual property theft.

Worst day in six weeks

The Dow Jones index has tumbled by 724 points, or 2.9 per cent, to 23,960.

This was its biggest fall since the February 8 sell-off, during which it shed 1,175 points.

As for the S&P 500 and Nasdaq, they also fell by a hefty 2.5 and 2.4 per cent respectively.

European stock markets also suffered massive losses in reaction to the tariff announcement — with steep falls for London (-1.2pc), Frankfurt (-1.7pc) and Paris (-1.4pc).

Industrial stocks were among the weakest performers, with Boeing and Caterpillar sliding by 5.2 and 5.7 per cent respectively.

Technology stocks also fared poorly, with Facebook shares dropping by another 2.7 per cent overnight.

The S&P technology sector was dragged down as well over fears there might be tighter regulation on how these companies use people’s data.

“There’s too much negative sentiment right now,” John Carey, portfolio manager at Amundi Pioneer Asset Management in Boston, said.

“I don’t see anything on the horizon that will reassure people that things are just great.”

Australian market to sink

Following the negative lead from global markets, the Australian share market is likely to fall sharply at the open.

In currencies, the Australian dollar has fallen sharply to 77.06 US cents, 54.6 British pence, 62.6 Euro cents, and 81.2 Japanese yen.

As for how the ASX would fare if a trade war erupted, CMC Markets’ Michael McCarthy told the ABC: “Australia’s resource-heavy share market is likely to suffer more than most other share markets.”

“Industrials and commodities are likely to slump if this continues, so the materials and energy sectors will be hit hard.”

How Fed rate hike will affect your finances

Credit cards

Most credit cards have a variable rate, which means there’s a direct connection to the Fed’s benchmark rate and card holders will feel an immediate pinch.

“Variable rate debt is where you are most susceptible as interest rates rise,” McBride said.

The average American has a credit card balance of $6,375, up nearly 3 percent from last year, according to Experian’s annual study on the state of credit and debt in America. Total credit card debt has reached its highest point ever, surpassing $1 trillion in 2017, according to a separate report by the Federal Reserve.

Tacking on a 25-basis-point increase will cost credit card users roughly $1.6 billion in extra finance charges in 2018, according to a WalletHub analysis. Factoring in the five previous rate hikes, credit card users will pay about $8.4 billion more in 2018 than they would have otherwise, WalletHub said.

However, for those with good credit, there are still opportunities to find a better rate or snag a zero-interest balance transfer offer to insulate yourself for a time from further rate hikes and “give yourself a tail wind toward debt repayment,” McBride said.

Mortgages

The economy, the Fed and inflation all have some influence over long-term fixed mortgage rates, which generally are pegged to yields on U.S. Treasury notes, so there’s already been a spike since the start of the year.

The average 30-year fixed-rate is now about 4.54 percent — up from 4.15 percent on Jan. 1 and significantly higher than the record low of 3.5 percent in December 2012.

With interest rates rising, adjustable-rate mortgages will certainly be heading higher, too, and those with some types of ARM loans “are sitting ducks for getting another increase,” McBride said.

Many homeowners with adjustable-rate home equity lines of credit, which are pegged to the prime rate, also will be affected. But unlike an adjustable-rate mortgage, these loans reset immediately rather than once a year.

For example, a rate increase of 25 basis points would cause borrowers with a $50,000 home equity line of credit to see a $10 to $11 increase in their next monthly payment, according to Mike Kinane, senior vice president of consumer lending at TD Bank.

Stocks and the dollar fall after Fed rate move

“President Trump’s trade barriers are causing concerns for the Fed, where policymakers believe [such measures] will put a break on growth and the market seems to agree,” says Paul Flood, portfolio manager of the Newton Multi-Asset Income Fund.

Hot topic

The dollar is slipping, stock markets are under pressure and there is sustained demand for US government debt after the Federal Reserve stuck by forecasts that it will lift interest rates by a total of three times in 2018.

Meanwhile, worries about the impact of a potential trade war on global growth is deepening a sense of unease, knocking stocks and adding to the appeal of safer assets.

As expected, the US central bank lifted the target range for the federal funds rate by a quarter point to 1.75 per cent. Policymakers’ projections pointed to an extra rate increase in 2019 and further tightening in 2020, and said inflation would accelerate. Nonetheless, talk that they would signal a total of four rises for this year proved wrong.

That left the dollar looking exposed, and the index tracking it fell to a 10-session low on Thursday to 89.524, taking it down 1 per cent over the last two sessions and leaving its fall over the week at 0.8 per cent.

The yield on the 10-year US Treasury is falling as investors buy into the debt. It is down 4.6 basis points at 2.861 per cent. That on 2-year Treasuries is down 1.7bp at 2.299 per cent.

Equities

European stocks are falling, with selling gathering pace after mixed showing in Asia.

Frankfurt’s Xetra Dax 30 is down 1 per cent, with London’s FTSE 100 0.6 per cent weaker. The Europe-wide Stoxx 600 is down 0.8 per cent.

Japan’s Topix swung between gains and losses to rise 0.7 per cent overall.

Hong Kong’s Hang Seng fell 1.1 per cent. The CSI 300 index of Shenzhen and Shanghai stocks fell 1.1 per cent as the latest threats of trade curbs from the Trump administration were said to be designed to stop China from stealing the intellectual property of American business, and after the Chinese central bank raised short-term rates.

US stocks are expected to fall further after weakening over a choppy session on Wednesday. Futures trade is pointing to losses of 0.7 per cent for the S&P 500 after a 0.2 per cent slip.

Forex

The pound is up 0.2 per cent at $1.4170 ahead of a rate call from the Bank of England, at which it is expected to leave interest rates on hold, with analysts thinking the next increase will come in May.

The euro is up 0.4 per cent at $1.2384, while the yen is 0.3 per cent stronger at 105.68.