Category: Domestic Relocation Challenges

Many real estate experts would predict that interest rates will continue to rise in the immediate future. With rates going up, the Federal Reserve has begun to pull back on the purchase of mortgage-backed securities (MBS). This will likely hike up interest rates because the return rate on mortgage bonds has to be higher to bring in investors. 

The Federal Reserve controls the percentage of the Fed funds rate. But that does not mean there is a direct correlation between short-term interest rates on funds from banks and consumer interest rates. If it becomes more expensive for banks to borrow, they are more likely to pass that cost on to consumers through higher interest rates. This is the main reason for those predicting interest rates to rise in the coming month.

It’s worth mentioning that interest rates were low for so long to boost the economy while the world dealt with the COVID-19 pandemic. This favored higher home prices because lower interest rates meant that buyers’ budgets could be stretched further.

This option works best for companies who want or need to know how much they will spend on mortgage assistance for moving employees. A dollar-based mortgage subsidy works because the organization is willing to pay a total of $25,000 to help the transferee with mortgage and interest rates. Instead of giving all the money upfront, the company could provide the employee 40% in the first year, 30% in the second year, then 20% in the third year, and finally, give them the last 10% in the fourth year. 

This strategy is popular for relocation managers because it lowers the transferee’s monthly mortgage payment while the company knows precisely how much they are spending upfront for the four-year option.