What's Happening
Over the weekend, Silicon Valley Bank (SVB) and Signature Bank were both taken over by the FDIC, and several other banks could be up next.
A few things to consider:
- This is good news for mortgage rates. There will be a shift to safer investments, which means bonds. And in effect this acts like a pseudo round of quantitative easing, or as some are calling it, “QE-Lite”.
- It will be bad for the stock market, which means good for hard assets. You will see money flow to precious metals and real estate.
- With inventory levels terribly low already, lower interest rates will tend to create upward pressure on home prices.
By The Numbers
Additionally, the Federal Reserve’s interest rate hikes are finally starting to bite and consumers are getting stretched and finding themselves in “pushed to the limits” type situations:
- Credit card debt is now at all time highs, a record $930.6 billion at the end of 2022, an 18.5% spike from a year earlier, according to the latest quarterly report by TransUnion. The average balance rose to $5,805 over that same period.
- An estimated 60% of Americans live check to check. Source: CNBC
As a result, Debt Consolidation and Cash-Out Refinances may be coming back to the forefront sooner than expected, and this might be a good time to discuss a strategy that can help address rising debt.
Some consumers will give up a lower rate to get overall lower monthly payments. We have recently seen some scenarios where a borrower’s monthly outflow was significantly improved with a cash-out refinance even with an interest rate almost 2% higher than their original note rate. Now, to be sure, this is not a lending path for every borrower and obviously there are many factors to look at. But it is very likely consumers will benefit by turning to their home equity as a solution for all this debt.
Reality Check
Some consumers will give up a lower rate to get overall lower monthly payments. We have recently seen some scenarios where a borrower’s monthly outflow was significantly improved with a cash-out refinance even with an interest rate almost 2% higher than their original note rate. Now, to be sure, this is not a lending path for every borrower and obviously there are many factors to look at. But it is very likely consumers will benefit by turning to their home equity as a solution for all this debt
Jumbo Cash-Out Refinance Highlights
Occupancy: Primary
Property Type: 1 unit/PUD/Condo
Max Loan Amount: $3M
Max LTV: 75%
Min FICO: 670
Occupancy: Second Home
Property Type: 1 unit/PUD/Condo
Max Loan Amount: $3M
Max LTV: 70%
Min FICO: 710
