- Today's Scoop:
Hey friend - tomorrow will be the last scoop of the week. Markets are closed on Thursday for the Thanksgiving holiday.
Today’s story on Google marks our 2,500th Company Scoop! 🍾🍾
We’re only just getting started on this mission. We’ve hit some technical delays on the app, but you’re going to be psyched when you see it.🚀🚀
Here’s what you need to know today…
Policymakers are still on high alert for an inflation comeback.
Americans have cut back on borrowing amidst higher rates.
High mortgage rates have stalled home sales.
The Market: ⬇️ -0.2%
S&P 500: 4,538.19
1Mo: +8% | 1Yr: +13% | 5Yr: +72%
The market drifted sideways and slightly lower today as retailers warned of a shopper slowdown and weaker holiday sales.
Policymakers don't expect to make borrowing cheaper anytime soon. Newly released minutes from the Federal Reserve’s last meeting revealed little inclination for cutting interest rates that currently sit at the highest level in over 20 years. They are still concerned with inflation and indicated that the current policy would need to stay restrictive until there is clear evidence of inflation returning to the central bank's 2% annual target. Living costs have increased 3.2% in the past year.
Fewer Americans want to borrow money or open new credit cards at high interest rates. The New York Fed's Credit Access Survey for October 2023 revealed a decline in credit applications and an increase in rejection rates. More people have been turned away from new loans for diminishing financial health. A rising number of consumers say they couldn’t afford an unexpected $2,000 expense.
Low inventory and high mortgage rates are still stifling the housing market. According to the National Association of Realtors, sales of existing homes in the US declined by 4.1% in October compared to September, marking the slowest sales pace in 13 years. Generationally high borrowing rates and a low supply of available homes are driving away buyers and prompting current homeowners to wait on selling. Existing home sales make up most of the US housing market and are a crucial indicator of its overall health.
How are you feeling about the economy?
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Inside Scoop 🤓
What determines mortgage rates?
A mortgage is a loan you take out to buy a home. The collateral, the thing you lose if you don’t pay back the money, is the home itself. The collateral reduces the risk for the lender. Credit cards have much higher rates because there’s no collateral.
Mortgage rates can be fixed or floating. A fixed-rate means you've locked in that percentage of the loan you need to pay back in interest each month, and it won't increase. A floating rate is usually tied to the movement of a benchmark interest rate. So, as broader interest rates rise, your rate increases, and you pay more each month.
Whether fixed or floating, banks determine their mortgage rates by taking a baseline low-risk lending rate like US Treasury bonds, then marking it up based on how risky you are as a borrower. So banks say, OK, we can lend to the US Government (considered no default risk) for ten years at 4% interest. You're more likely to default than the US Government, so you must pay us higher interest to make it worth the risk, maybe 7%. As baseline rates rise, your rates will rise.