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Yahoo
20 hours ago
- Business
- Yahoo
Homebuyers need a psychological reset even as BoC rates plateau
With few — or no — further Bank of Canada (BoC) rate cuts expected this year, the country's housing market is facing a stark reality: a recovery hinges less on borrowing costs and more on a psychological reset. For activity to resume, experts say buyers and sellers must abandon hopes of a return to super-low rates and accept that current conditions are the new normal. 'As long as they expect things to be better for them if they wait, they're going to wait,' said Tsur Somerville, a professor of real estate finance at the University of British Columbia. Confidence is the main issue, not interest rates, says CIBC economist Benjamin Tal. He argues that the economic uncertainty is profound, driven by weak investment, slowing consumer demand and unresolved trade tensions. 'We are basically very close to a recession. I suggest we are in a recession in Ontario already,' Tal said. That lack of confidence is keeping the market in a deep freeze, even as economists widely expect the Bank of Canada to hold its policy rate steady on Wednesday. While CIBC is calling for two potential cuts later this year, Tal admits it's a 'tough call,' with stubborn core inflation and surprising employment data. By next year, he says, 'you have to start thinking about the Bank of Canada hiking rates, not cutting rates.' This reality is trickling down to buyers, but creating two very different reactions. For some, stability is enough. In May and June, activity picked up in 'hot pockets' of Toronto and Vancouver as some buyers took the central bank's steady tone as a sign of certainty. 'Buyers are using that as, 'That's the confidence I need,'' said Samantha Villiard, a regional vice-president at ReMax Canada. For many others though, the pressure has long been nearly unbearable. Ron Butler, a mortgage broker at Butler Mortgage, says that for middle-class families, the half-a-percent rise in fixed mortgage rates in recent weeks was another deflating moment. Clients tell him: "It's not just this increasing rate. It's everything,' he said. 'It's just an endless kind of crushing affordability context that, you know, you can tell from the sound of their voice that this is like a grievance against them." I believe that higher rates, namely relative to what they were a few years ago, are here to Tal, economist, CIBC Should fixed rates, which have moved into the "low to mid-fours," start heading back towards five per cent, Butler warns the effect would be devastating. 'It will literally crush everyone's dreams.' For those with mortgages renewing, Butler's advice is urgent. 'Go back to every email, every touch point you've ever had from your bank and see if they did offer you a rate that started with a three ... You have to make absolutely sure you might have access to those low rates.' Still, some experts argue that an era of higher rates is a necessary correction. Tal says Canadians were 'spoiled' by historically low rates during the pandemic, which overheated demand. 'I believe that higher rates, namely relative to what they were a few years ago, are here to stay,' he said. 'And that's actually a very healthy situation, because if there was something that was mispriced in the market for a long period of time, it was cash.' If rates hold steady, housing prices might not fall much further — except in the condo segment, which Tal describes as being in a 'deep recession' where pre-sale activity is 'basically dead." Instead, affordability might improve gradually, led by rising wages. 'Every homebuyer is willing to spend up to the maximum they can spend,' said UBC's Somerville. 'So if interest rates stay at this level, then prices will adjust relative to incomes in such a way over time to make housing plausible... The most likely way is prices stay flat while incomes catch up.' Villiard says Toronto's stirring market (outside of condos) has both buyers and sellers 'coming to the table being reasonable,' but a sustained rebound likely depends on macroeconomic clarity — especially on the trade front. 'The catalyst? A decision on the trade negotiations. That is really what we're all waiting to see,' she said. Tal agrees, noting that the Bank of Canada is playing it safe until there's more certainty on tariffs. 'They don't want to take any chances with Trump,' he said. 'They need more information to make a decision.' John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf. Download the Yahoo Finance app, available for Apple and Android. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
21 hours ago
- Business
- Yahoo
Fed's policy toolkit may be headed for fundamental changes
By Michael S. Derby (Reuters) -A U.S. senator's recent push to strip the Federal Reserve of a key aspect of how it controls interest rates and the battle over who will succeed Fed Chair Jerome Powell point to a future where some of the tools policymakers use to influence the economy come under greater scrutiny. There's no sense of imminent changes in the Fed's monetary policy mechanics. But that may not always be the case, especially as President Donald Trump, a persistent critic of the central bank who wants it to reduce interest rates, prepares to name a successor for Powell, whose term expires next May. The first sign of shifting ground came from Republican Senator Ted Cruz, who last month pushed to end interest payments paid by the Fed on bank reserves parked at the central bank. Ending this practice was also cited, among other back-to-basics proposals, in the influential Project 2025 effort that has helped drive some of Trump's agenda since he returned to power in January. Cruz's effort appears to have gained little traction, but success would upend how the Fed manages interest rates and have major implications for the central bank's large bond holdings. Meanwhile, how the Fed uses bond purchases and its balance sheet to stimulate or restrain the economy is also getting attention. It has been shedding bonds since 2022, but at least one possible Powell successor wants an even more aggressive drawdown motivated by a novel understanding of how the balance sheet affects the economy. TOOL TROUBLE The Fed began paying interest on bank reserves during the global financial crisis in 2008. With its benchmark interest rate near zero and the financial system flush with cash from the central bank's bond purchases, this move granted the same control over rates the Fed had when bank reserves were much less abundant. Over time the Fed built out this system and formalized it in 2019. Officials have shown no desire to go back to the pre-crisis system. "The current regime has a number of positive attributes that people I don't think fully appreciate," said William Dudley, a former head of the New York Fed who also managed the implementation of monetary policy when the new system was created. "It makes monetary policy execution really easy" and saves the Fed from active intervention in markets to manage reserve levels. The system, however, has been dogged by criticism that it is an unfair financial sector subsidy. It has also pushed the Fed from a consistent profit maker to a money loser, and the profits it once handed to the Treasury to defray federal deficits are gone until the central bank can clear the red ink. Cruz argued that his push to end the power was ultimately about lowering deficits. But critics contend his goal of a de facto return to the pre-crisis policy system was full of unintended consequences and misunderstandings. Dudley said losses are not inherent to the current rate-control system but arise from the Fed having bought longer-dated bonds as a form of stimulus, creating the current mismatch between income and interest expenses that's led to losses. Powell told a U.S. Senate committee in June that "if you were to want to go back to scarce reserves, it would be a long and bumpy and volatile road." Losing interest rate-paying power could force the Fed to aggressively retire the excess liquidity that its current toolkit relies upon to prevent short-term rates from spiraling out of control. And that would likely mean the Fed would sell a substantial portion of the bonds it now owns. "I understand there is a desire on the part of some to go back to the pre-(global financial crisis) framework for operating monetary policy," said Ellen Meade, a former top Fed staffer who is now an economics professor at Duke University. But the selling of bonds needed to draw down liquidity rapidly would push up real-world interest rates, "so any return to the pre-GFC system will involve macroeconomic pain." BALANCE-SHEET BLUES Even without toying with the Fed's rate-control tools, questions abound regarding how big its bond holdings should be. Since 2022 it has shed more than $2 trillion of bonds, and market participants estimate the reductions will end when the balance sheet drops to about $6.1 trillion from the current $6.7 trillion. Fed Governor Christopher Waller, who has been mentioned as a possible successor to Powell, recently said it's possible that holdings could drop to $5.9 trillion. Kevin Warsh, a former Fed governor who is also said to be on the short list to replace Powell, wants to go much further, and for unique reasons. In recent television interviews, he's laid out a Fed balance sheet vision that would mix rate cuts aimed at bolstering Main Street with aggressive bond holding cuts, which he believes will tamp down Wall Street speculation. "We're skeptical of that policy prescription," analysts at research firm Wrightson ICAP wrote. They noted, however, that Warsh's view "is a vivid reminder that everything in U.S. economic policy will be up for grabs over the coming year." How much is bluster versus real strategy for change at the Fed is unclear. When it comes to recent developments, a lot is tied to "Republicans leaving no stone unturned in their sort of ongoing campaign of pressuring the Fed for easier policy in general," said Derek Tang, an analyst with forecasting firm LH Meyer. "The balance sheet is a very big front for that, because it's sort of where the Fed's rate-setting and portfolio decisions intersect with the amount of fiscal space that the Trump administration has." 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Yahoo
21 hours ago
- Business
- Yahoo
HELOC rates today, July 29, 2025: Rates remain steady ahead of this week's Fed meeting
The HELOC interest rate remains steady; however, rates vary depending on where you live, so comparing lender offers remains important. Home equity line of credit interest rates are waiting for a Federal Reserve interest rate cut, which is not expected to be announced following Wednesday's meeting. The latest Wall Street prediction is a possible rate cut in September. However, the best HELOC lenders will offer low, introductory rates lasting from six months to one year. Now, let's check today's HELOC rate. Dig deeper: HELOC vs. home equity loan: Tapping your equity without refinancing This embedded content is not available in your region. HELOC rates Tuesday, July 29, 2025 According to Bank of America, the largest HELOC lender in the country, today's average APR on a 10-year draw HELOC is 8.72%. That is a variable rate that kicks in after a six-month introductory APR, which is 6.49% in most parts of the country. The national HELOC rate spread runs from a low of 8.05% APR to a high of 9.59%. Homeowners have a staggering amount of value tied up in their houses — more than $34 trillion at the end of 2024, according to the Federal Reserve. That's the third-largest amount of home equity on record. With mortgage rates lingering in the high 6% range, homeowners are not likely to let go of their primary mortgage anytime soon, so selling the house may not be an option. Why let go of your 5%, 4% — or even 3% mortgage? Accessing some of the value locked into your house with a use-it-as-you-need-it HELOC can be an excellent alternative. How lenders determine HELOC interest rates HELOC interest rates are different from primary mortgage rates. Second mortgage rates are based on an index rate plus a margin. That index is often the prime rate, which today is 7.50%. If a lender added 1% as a margin, the HELOC would have a rate of 8.50%. Lenders have flexibility with pricing on a second mortgage product, such as a HELOC or home equity loan, so it pays to shop. Your rate will depend on your credit score, the amount of debt you carry, and the amount of your credit line compared to the value of your home. And average national HELOC rates can include "introductory" rates that may only last for six months or one year. After that, your interest rate will become adjustable, likely beginning at a substantially higher rate. Up Next Up Next How a HELOC works You don't have to give up your low-rate mortgage to access the equity in your home. Keep your primary mortgage and consider a second mortgage, such as a home equity line of credit. The best HELOC lenders offer low fees, a fixed-rate option, and generous credit lines. A HELOC allows you to easily use your home equity in any way and in any amount you choose, up to your credit line limit. Pull some out; pay it back. Repeat. Meanwhile, you're paying down your low-interest-rate primary mortgage like the wealth-building machine you are. This embedded content is not available in your region. Look for introductory rates, but be aware of a rate adjustment later Today, FourLeaf Credit Union is offering a HELOC rate of 6.49% for 12 months on lines up to $500,000. That's an introductory rate that will convert to a variable rate later. When shopping lenders, be aware of both rates. And as always, compare fees, repayment terms, and the minimum draw amount. The draw is the amount of money a lender requires you to initially take from your equity. The power of a HELOC is tapping only what you need and leaving some of your line of credit available for future needs. You don't pay interest on what you don't borrow. HELOC rates today: FAQs What is a good interest rate on a HELOC right now? Rates vary so much from one lender to the next that it's hard to pin down a magic number. You may see rates from nearly 7% to as much as 18%. It really depends on your creditworthiness and how diligent a shopper you are. Is it a good idea to get a HELOC right now? For homeowners with low primary mortgage rates and a chunk of equity in their house, it's probably one of the best times to get a HELOC. You don't give up that great mortgage rate, and you can use the cash drawn from your equity for things like home improvements, repairs, and upgrades. Of course, you can use a HELOC for fun things too, like a vacation — if you have the discipline to pay it off promptly. A vacation is likely not worth taking on long-term debt. What is the monthly payment on a $50,000 home equity line of credit? If you take out the full $50,000 from a line of credit on a $400,000 home, your payment may be around $395 per month with a variable interest rate beginning at 8.75%. That's for a HELOC with a 10-year draw period and a 20-year repayment period. That sounds good, but remember, it winds up being a 30-year loan. HELOCs are best if you borrow and pay back the balance in a much shorter period of time.
Yahoo
21 hours ago
- Business
- Yahoo
Best savings interest rates today, July 29, 2025 (Earn up to 4.31% APY)
The Federal Reserve reduced its target interest rate three times in 2024. As a result, high-yield savings account rates have been falling. That said, some of the best accounts still pay above 4% APY. In order to get the highest interest rate possible on your savings, it's important to do your research and find competitive offers. Not sure where to start? Here's a closer look at savings interest rates today and where you can find the best ones. Where are the best savings interest rates today? The average interest rate on a traditional savings account is only 0.42%, according to the FDIC. However, the best savings rates can be found on high-yield accounts, which often pay much more. As of July 29, 2025, the highest savings account rate available from our partners is 4.31% APY. This rate is offered by VIO Bank and requires no minimum opening deposit. Here is a look at some of the best savings rates available today from our verified partners: Historical savings account rates Over the last decade, savings account interest rates have fluctuated quite a bit. From 2010 to about 2015, rates were rock-bottom, hovering at around 0.06% to 0.10%. This was largely due to the 2008 financial crisis and the Federal Reserve's decision to lower its target rate to near zero in order to spur economic growth. From 2015 to 2018, interest rates began to increase gradually. However, they remained low by historical standards. Then the onset of the COVID-19 pandemic in 2020 led to another sharp decrease in rates as the Fed once again cut rates to stimulate the economy. This brought average savings interest rates down to new lows, around 0.05% to 0.06% by mid-2021. Since then, savings account rates have recovered considerably, largely driven by the Fed's interest rate hikes in response to skyrocketing inflation. However, the Fed finally lowered the federal funds rate in September, November, and December 2024, and as a result, deposit rates are beginning to fall as well. The following is a look at how savings interest rates have changed over the past decade: Is a high-yield savings account right for you? Despite the fact that interest rates have risen substantially since 2021, the average savings account rate is still fairly low, especially compared to market investments. If you're saving for a long-term goal such as a child's education or retirement, a savings account probably won't generate the returns needed to reach your goal. On the other hand, if you're saving for an emergency fund, home down payment, vacation, or other short-term goal, a high-yield savings account is ideal — especially if you want to access the funds as needed. Other types of deposit accounts, including money markets and CDs, may offer similar or even better rates, but restrict how often you can make withdrawals. The key is to shop around and find an account that provides a competitive rate with low or no fees.
Forbes
21 hours ago
- Business
- Forbes
Mortgage Rates Today: July 29, 2025
Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations. Today's average mortgage rate on a 30-year fixed-rate mortgage is 6.72%, up 0.60% from the previous week, according to the Mortgage Research Center. Borrowers may be able to save on interest costs by going with a 15-year fixed mortgage, which will often have a lower rate than a 30-year, fixed-rate home loan. The average APR on a 15-year fixed mortgage is 5.74%. However, a 15-year mortgage means you are paying off the house in half the amount of time compared to a 30-year term, so your monthly payments will be higher. If you want to refinance your existing mortgage, check out the average refinance rate . Today's average rate on a 30-year mortgage (fixed-rate) slipped to 6.72% from 6.73% yesterday. One week ago, the 30-year fixed was 6.68%. The 30-year fixed mortgage APR moved up to 6.75%. At this time last week, it was 6.71%. Here's why APR is important. At today's interest rate of 6.72%, homebuyers will pay $647 per month in principal and interest (taxes and fees not included) for every $100,000 borrowed on their 30-year fixed-rate mortgage, the Forbes Advisor mortgage calculator shows. You'd pay around $133,567 in total interest over the life of the loan per $100,000 borrowed. Today's 15-year mortgage (fixed-rate) is 5.69%, up 0.30% from the previous week. The same time last week, the 15-year, fixed-rate mortgage was at 5.67%. The APR on a 15-year fixed is 5.74%. It was 5.72% a week earlier. A 15-year, fixed-rate mortgage with today's interest rate of 5.69% will cost $827 per month in principal and interest on a $100,000 mortgage (not including taxes and insurance). In this scenario, borrowers would pay approximately $49,368 in total interest. The current average interest rate on a 30-year, fixed-rate jumbo mortgage (a mortgage above 2025's conforming loan limit of $806,500 in most areas) is 6.93%—0.33% higher than last week. A 30-year jumbo mortgage at today's fixed interest rate of 6.93% will cost you $660 per month in principal and interest per $100,000. That adds up to roughly $138,205 in total interest over the life of the loan. Mortgage rates initially trended downward post-spring 2024. However, they surged again in October 2024—despite cuts by the Federal Reserve to the federal funds rate (its benchmark interest rate) in September, November and December 2024. Rates began to drop again in mid-January 2025, but experts don't forecast them falling by a significant amount in the near future. Mortgage rates are influenced by various economic factors, making it difficult to predict when they will drop . Mortgage rates follow U.S. Treasury bond yields. When bond yields decrease, mortgage rates generally follow suit. The Federal Reserve's decisions and global events also play a key role in shaping mortgage rates. If inflation rises or the economy slows, the Fed may lower its federal funds rate. For example, during the Covid-19 pandemic, the Fed reduced rates, which drove interest rates to record lows. A significant drop in mortgage rates seems unlikely in the near future. However, they may decline if inflation eases or the economy weakens. The Federal Reserve's restrictive monetary policy – including its interest rate hikes, which it's using to restrain inflation – is the primary factor that's pushing long-term mortgage rates higher. The state of the economy and housing market also affects mortgage rates. As for what interest rate the lender might offer you, this depends on your debt-to-income (DTI) ratio and credit score, both of which indicate your risk as a borrower. Related: Mortgage Rates Forecast And Trends Shop around and talk to various lenders to get a sense of each company's mortgage loan offerings and services. Don't go with the first lender quote you receive; instead, compare the best mortgage rate quotes to get a deal. In particular, consider what fees they charge, what fees they're willing to waive and what closing assistance they might provide. Make sure any special offers or discounts don't come at the cost of a higher mortgage rate. Be sure to apply with each lender within a 45-day window. During this window, you can have multiple lenders pull your credit history without additional impact on your credit score. Mortgage rates remain elevated, and the nation's housing supply remains limited. The low inventory is preventing house prices from dropping. Meanwhile, the combination of high mortgage rates and appreciated home values will continue to present an obstacle for many prospective homebuyers seeking affordable housing. Mortgage interest rates are determined by several factors, including some that borrowers can't control: Federal Reserve. The Fed rate hikes and decreases adjust the federal funds rate, which helps determine the benchmark interest rate that banks lend money at. As a result, mortgage rates tend to move in the same direction with the Fed's rate decision. The Fed rate hikes and decreases adjust the federal funds rate, which helps determine the benchmark interest rate that banks lend money at. As a result, mortgage rates tend to move in the same direction with the Fed's rate decision. Bond market. Mortgages are also loosely connected to long-term bond yields as investors look for income-producing assets—specifically, the 10-year U.S. Treasury Bond. Home loan rates tend to increase as bond prices decrease, and vice versa. Mortgages are also loosely connected to long-term bond yields as investors look for income-producing assets—specifically, the 10-year U.S. Treasury Bond. Home loan rates tend to increase as bond prices decrease, and vice versa. Economic health. Rates can increase during a strong economy when consumer demand is higher and unemployment levels are lower. Anticipate lower rates as the economy weakens and there is less demand for mortgages. Rates can increase during a strong economy when consumer demand is higher and unemployment levels are lower. Anticipate lower rates as the economy weakens and there is less demand for mortgages. Inflation. Banks and lenders may increase rates during inflationary periods to slow the rate of inflation. Additionally, inflation makes goods and services more expensive, reducing the dollar's purchasing power. While the above factors set the base interest rate for new mortgages, there are several areas that borrowers can focus on to get a lower rate: Credit score. Applicants with a credit score of 670 or above tend to have an easier time qualifying for a better interest rate. Typically, most lenders require a minimum score of 620 to qualify for a conventional mortgage. Applicants with a credit score of 670 or above tend to have an easier time qualifying for a better interest rate. Typically, most lenders require a minimum score of 620 to qualify for a conventional mortgage. Debt-to-income (DTI) ratio. Lenders may issue mortgages to borrowers with a DTI of 50% or less. However, applying with a DTI below 43% is recommended. Lenders may issue mortgages to borrowers with a DTI of 50% or less. However, applying with a DTI below 43% is recommended. Loan-to-value (LTV) ratio. Conventional home loans charge private mortgage insurance when your LTV exceeds 80% of the appraisal value, meaning you need to put at least 20% down to avoid higher rates. Additionally, FHA mortgage insurance premiums expire after the first 11 years when you put at least 10% down. Conventional home loans charge private mortgage insurance when your LTV exceeds 80% of the appraisal value, meaning you need to put at least 20% down to avoid higher rates. Additionally, FHA mortgage insurance premiums expire after the first 11 years when you put at least 10% down. Loan term. Longer-term loans such as a 30-year or 20-year mortgage tend to charge higher rates than a 15-year loan term. However, your monthly payment can be more affordable over a longer term. Longer-term loans such as a 30-year or 20-year mortgage tend to charge higher rates than a 15-year loan term. However, your monthly payment can be more affordable over a longer term. Residence type. Interest rates for a primary residence can be lower than a second home or an investment property. This is because the lender of your primary mortgage receives compensation first in the event of foreclosure. As you compare lenders, consider getting rate quotes for several loan programs. In addition to comparing rates and fees, these programs can have flexible down payment and credit requirements that make qualifying easier. Conventional mortgages are likely to offer competitive rates when you have a credit score between 670 and 850, although it's possible to qualify with a minimum score of 620. This home loan type also doesn't require annual fees when you have at least 20% equity and waive PMI. Several government-backed programs are better when you want to make little or no down payment: FHA loans. Borrowers with a credit score above 580 only need to put 3.5% down and applicants with credit scores ranging from 500 to 579 are only required to make a 10% down payment with FHA loans. Borrowers with a credit score above 580 only need to put 3.5% down and applicants with credit scores ranging from 500 to 579 are only required to make a 10% down payment with VA loans. Servicemembers, veterans and qualifying spouses don't need to make a down payment when the sales price is less than the home's appraisal value. VA loan credit requirements vary by lender. Servicemembers, veterans and qualifying spouses don't need to make a down payment when the sales price is less than the home's appraisal value. credit requirements vary by lender. USDA loans. Applicants in eligible rural areas can buy or build a home with no money down using a USDA loan . Moderate-income borrowers can qualify for a 30-year fixed-rate term through the Guaranteed Loan Program. Further, buyers with a very low or low income can receive a 33-year term and payment assistance is available through the agency's Direct Loans program. Credit requirements differ by lender. Frequently Asked Questions (FAQs) Comparing lenders and loan programs is an excellent start. Borrowers should also strive for a good or excellent credit score between 670 and 850 and a debt-to-income ratio of 43% or less. Further, making a minimum down payment of 20% on conventional mortgages can help you automatically waive private mortgage insurance premiums, which increases your borrowing costs. Buying discount points or lender credits can also reduce your interest rate. The Federal Reserve's efforts to stabilize the economy during the Covid-19 pandemic drove the historically low rates. As the economy recovers, the unemployment rate decreases and inflation is controlled, rates may dip below current levels, but they're unlikely to fall as low as 3% again anytime soon. A mortgage interest rate reflects what a lender is charging you on top of your loan amount in return for allowing you to borrow money. Annual percentage rate (APR) , on the other hand, is a calculation that includes both a loan's interest rate and finance charges, expressed as an annual cost over the life of the loan. In other words, it's the total cost of credit. APR accounts for interest, fees and time. Since APRs include both the interest rate and certain fees associated with a home loan, the APR can help you understand the total cost of a mortgage if you keep it for the entire term. The APR will usually be higher than the interest rate, but there are exceptions.
