Finance

Mortgage lending took a huge dip in Q4, but there’s hope for spring housing: report

Published

8 months ago

April 2, 2024

Business Finance News

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Housing supply is improving as the spring home buying season nears. (iStock)

Mortgage lending continued to drop considerably in the fourth quarter of 2023, but a recent report indicates that a turnaround is coming.

High home prices, soaring borrowing costs and low housing supply drove lending rates to a two-decade low, with activity down 16.5% from a year earlier and 67.7% from a high point hit in the first quarter of 2021, according to the report by ATTOM. Lenders issued $417.4 billion of residential mortgages in the fourth quarter of 2023, a drop of 14.9% from the third quarter of 2023 and 18.6% from the fourth quarter of 2022.

However, home lending surged nearly 30% in the spring of last year and the rate could increase again this spring if mortgage rates continue to decline as predicted and housing supply improves.

“Multiple powerful forces continued to conspire against the mortgage industry during the fourth quarter, slicing back huge portions of their business,” ATTOM CEO Rob Barber said. “There were signs during the peak buying season of 2022 that things were starting to turn around, with increases in purchase, refinance and HELOC deals. That could happen again this year as we head into this year’s peak period, especially with interest rates coming down recently.

“But the fourth-quarter numbers revealed continued gloomy times for lenders, no matter how you sliced the pie,” Barber continued.

Homebuyers can find better mortgage rates by shopping around and comparing options. Visiting an online marketplace like Credible can help you compare rates, choose your loan term and get preapproved by multiple lenders at once.

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Supply builds as spring nears

Realtor.com economists predict that mortgage rates will slide into the 6% territory in 2024. Fannie Mae expects mortgage rates to decline gradually over the next two years, reaching 6.9% for the 30-year mortgage by 2025. At the same time, First American economists noted that mortgage rates will hover in the 6.5% to 7.5% range.

The dip in rates could help build some much-needed housing supply. Some homeowners are already selling, according to a recent Redfin report. New listings rose 13% from a year earlier nationwide during the four weeks ending March 3, the most significant increase in nearly three years. Home prices have also lost some momentum. Roughly 5.5% of home sellers dropped their asking price, the highest share of any February since at least 2015.

“There have been two major obstacles for homebuyers over the last year: low inventory and high housing costs,” Redfin Economic Research Lead Chen Zhao said. “Now, the first barrier is starting to come down as more supply comes on the market. Housing costs are still high, but they’re likely to come down a bit as mortgage rates gradually decline through the year and price growth loses some steam.

“Buyers who can afford today’s mortgage rates may have better luck finding a home now than they have in the past several months, and they also may be less likely to face competition because inventory is improving,” Zhao continued.

If you’re looking to become a homeowner, you could still find the best mortgage rates by shopping around. An online marketplace like Credible can help you compare your options.

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Creative avenues for home affordability

First-time homebuyers are finding ways to forge their path to homeownership. For example, many young Americans planning to buy a home next year are relying on side income to generate cash, according to a Redfin survey.

Forty-one percent of Gen Zers and 36% of Millennials said they are working second jobs to save for their down payment and about one-quarter plan to use a cash gift from family. Some have even opted to house hack to help pay off their mortgage and other bills, according to a recent Realtor.com report. This is when a buyer purchases a home intending to rent out rooms for the long or short term.

The co-buying trend is another way young buyers share homeownership costs, according to the report. Co-buying helps friends and family pool resources to come up with down payments and closing costs. It is also a way to share costly monthly mortgage payments, utility bills and maintenance and repair costs.

If you’re considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.

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Finance

Visa & Mastercard execs grilled by senators on high swipe fees

Published

2 hours ago

November 19, 2024

Business Finance News

The Senate Judiciary Committee convened on Tuesday for a hearing on the alleged Visa–Mastercard “duopoly,” which committee members from both sides of the aisle say has left retailers and other small businesses with no ability to negotiate interchange fees on credit card transactions.

“This is an odd grouping. The most conservative and the most liberal members happen to agree that we have to do something about this situation,” committee chair and Democratic Illinois Sen. Dick Durbin said.

Interchange fees, also known as swipe fees, are paid from a merchant’s bank account to the cardholder’s bank, whenever a customer uses a credit card in a retail purchase. Visa and Mastercard have a combined market cap of more than $1 trillion, and control 80% of the market.

“In 2023 alone, Visa and Mastercard charged merchants more than $100 billion in credit card fees, mostly in the form of interchange fees,” Durbin told the committee.

Durbin, along with Republican Kansas Sen. Roger Marshall, have co-sponsored the bipartisan Credit Card Competition Act, which takes aim at Visa and Mastercard’s market dominance by requiring banks with more than $100 billion in assets to offer at least one other payment network on their cards, besides Visa and Mastercard.

“This way, small businesses would finally have a real choice: they can route credit card transactions on the Visa or Mastercard network and continue to pay interchange fees that often rank as their second or biggest expense, or they could select a lower cost alternative,” Durbin told the committee.

Visa and Mastercard, however, stand by their swipe fees.

“We consider them incentives, some people might consider them penalties. But if you can adopt new technology that reduces the risk and takes fraud out of the system and improves streamlined processing, then you would qualify for lower interchange rates,” said Bill Sheedy, senior advisor to Visa CEO Ryan McInerney. “It’s very expensive to issue a product and to provide payment guarantee and online customer service, zero liability. All of those things, and many more, senator, get factored into interchange [fees].”

The executives also warned against the Credit Card Competition Act, with Sheedy claiming that it “would remove consumer control over their own payment decisions, reduce competition, impose technology sharing mandates and pick winners and losers by favoring certain competitors over others.”

“Why do we know this? Because we’ve seen it before,” Mastercard President of Americas Linda Kirkpatrick said, in reference to the Durbin amendment to the 2010 Dodd-Frank Act, which required the Fed to limit fees on retailers for transactions using debit cards. “Since debit regulation took hold, debit rewards were eliminated, fees went up, access to capital diminished, and competition was stifled.”

But the current high credit card swipe fees for retailers translate to higher prices for consumers, the National Retail Federation told the committee in a letter ahead of the hearing. The Credit Card Competition Act, the retail industry’s largest trade association wrote, will deliver “fairness and transparency to the payment system and relief to American business and consumers.”

“When we think of consumer spending, credit card swipe fees are not the first thing that comes to mind, yet those fees are a surprisingly large part of consumer spending,” Notre Dame University law professor Roger Alford said. “Last year, the average American spent $1,100 in swipe fees, more than they spent on pets, coffee or alcohol.”

Visa and Mastercard agreed to a $30 billion settlement in March meant to reduce their swipe fees by four basis points for three years, but a federal judge rejected the settlement in June, saying they could afford to pay more.

Visa is also battling a Justice Department lawsuit filed in September. The payment network is accused of maintaining an illegal monopoly over debit card payment networks, which has affected “the price of nearly everything,” according to Attorney General Merrick Garland.