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The Currency newsletter - issue 10

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By
The Currency editors

05.04.2023

Confusion spun last week, as prospective homebuyers wondered how the May 1 changes to mortgage rates may impact them. Would borrowers with higher credit scores shoulder an increased expense to support housing affordability? More on that below. 

Homeownership remains the financial freedom dream for 29% of Americans surveyed by Empower. That wish is followed closely by the ability to go on vacation when desired (28%) — a reality for at least one remote worker* who decided to forgo both buying and renting in favor of vacation-rental hopping. But for most people (54%), living financially free means bidding adieu to debt. 

It’s all a matter of perspective. 

As we close in on the midyear mark, we’re channeling today's galactic energy and shedding some light(saber) on balancing those short-term goals with long-term success. 

— The Editors 

Bank buyout: First Republic Bank became the year’s third bank to fail after being taken over by regulators and sold to JPMorgan Chase.* The action follows First Republic’s disclosure last week that customers had withdrawn more than half of its deposits to the tune of $100 billion.* Many analysts consider the collapse a delayed reaction to the upheaval in March rather than a fresh cycle in the crisis. 

Long winter for the bears: The S&P 500 has been in a bear market, down more than 20% from its high, for the longest stretch since 1973.* For many investors, it’s been a tough season. On the upside? Those who’ve held on have learned a thing or two about weathering the storm. 

Howdy, hiker: For the 10th time this year, the Federal Reserve voted to raise interest rates to a target range of 5%-5.25%.* It hasn't been this high since the housing boom in 2006. 

Fee speech in the housing markets 

The Federal Housing Financing Administration clapped back* last week after a new mortgage pricing framework came under scrutiny as potentially penalizing borrowers with good credit.* 

The changes are part of the federal government's effort to provide equitable access to home ownership, though “higher-credit-score borrowers are not being charged more so that lower-credit-score borrowers can pay less,” FHFA said in a statement. 

Fee structures notwithstanding, homebuyers are facing the highest mortgage rates in more than a decade. As of mid-April, a 30-year fixed-rate mortgage averaged 6.39% — more than double (2.97%) two years ago. 

High prices and rising rates have deterred some Zillow enthusiasts from taking the plunge. If you're on the side of buyers, what could you afford to spend? Time to calculate your PITI, the principal, interest, taxes, and insurance that makes up your monthly mortgage payment. 

Is feedback a missed gift? 

On the heels of large-scale returns to office,* proponents of remote work continue to herald the model that they say allows more flexibility without reduced productivity. But some employees, especially younger ones, may be paying a professional price. 

new working paper* is among the first major studies to show an interpersonal downside of remote work: less feedback. Economists who studied engineers at a large tech company found that younger engineers struggled, or quit, without the mentorship training that comes in person. 

Unlike other generations, Gen Z entered the workforce during those Unprecedented Times; most entry-level employees have only worked in remote or hybrid situations. 

One way to keep younger talent in the pool? Open 👏 that 👏 dialogue 👏. Empower’s Money Talks survey found that the majority (71%) of Gen Zers believe that discussing salaries can lead to better career opportunities. Overall, survey respondents agree that greater wage transparency motivates employees to work harder (50%) and helps avoid miscommunications (60%). 

 

Swipe it, tap it, cash it 

As consumers experience the pinch of inflation, they've reached more readily for cold hard cash, at 20% in 2021 versus 19% in 2020, according to the most recent Fed data.* Though small, the increase is notable as it represents the first year-over-year bump in cash payments since the Fed began collecting payment information in 2016. 

Could cash be cool? 

Cash stuffing” is having a moment in the limelight after one Texas woman reported keeping money in envelopes to budget and pay off almost $80,000 in debt. The goal is to simplify spending – and make it more tangible – by identifying recurring bills and monthly expenses, and then stashing away enough cash in envelopes to cover payments. 

However you choose to budget or spend at the checkout aisle, be sure to keep an eye on those long-term goals. Empower’s Money Talks respondents say their top financial mistake (41%) is not stowing away enough for the future. Get our take on seven steps for retirement saving.

*Empower Retirement, LLC and its affiliates are not affiliated with the author or responsible for the third-party content provided from links to external material. 

As of May 4, 2023, EAG hold shares of JPM in advisory client accounts and do not hold FRC. 

RO2882326-0523

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The Currency editors

Staff contributors

The Currency is a personal finance publication powered by Empower and run by a team of writers and editors. We deliver the financial news and views you need to know for life, work and play.

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