ECB Is Close to Reaching Its Inflation Target, Nagel Says
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The European Central Bank is close to hitting its 2% inflation goal, but elevated uncertainty makes it impossible to predict future interest-rate moves and requires maximum flexibility, Governing Council member Joachim Nagel said.
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CBS News
15 minutes ago
- CBS News
How to determine HELOC affordability in today's changing rate climate
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before taking out a HELOC, it's important to determine whether you can actually afford this type of borrowing, both now and in the long term. lOvE/Getty Images The Federal Reserve is dealing with a delicate balancing act, trying to do what's necessary to lower inflation without wreaking havoc on the economy. In pursuit of those economic goals, the Fed has maintained the federal funds rate at its current level throughout 2025 to counteract the inflation that has plagued Americans over the past several years. While the hope is that this strategy will smooth things out in the long term, borrowers are bearing the brunt of this choice in the short term. The Fed rate impacts the interest rates on various types of loans, and today's higher-than-average Fed rate has increased the cost of borrowing. With credit card interest rates averaging around 22% and personal loans at 12%, home equity lines of credit (HELOCs) have become a lower-cost alternative. Average HELOC interest rates come in much lower at 8.14% currently after falling below 8% in early April. While that rate is more borrower-friendly, HELOCs have variable interest rates, which can make the payments unpredictable. So, before opening a HELOC, borrowers need to consider how much they can truly afford. We spoke with home lending experts on how to determine HELOC affordability in today's uncertain and changing rate climate. Compare your top home equity borrowing options online now. How to determine HELOC affordability in today's changing rate climate Any time you borrow, you need to make sure you can fulfill your repayment obligations. For HELOC borrowers who use their home as collateral, that's even more important to stave off a potential foreclosure. In that way, the HELOC risks are important to consider as the stakes are high. "Step one will be what the bank is willing to lend you. But while that's a great barometer to say, 'Okay, I'm qualified,' it doesn't necessarily mean that the individual could afford it, and that it makes sense for them. So they have to do their own calculations," says Shmuel Shayowitz, president and chief lending officer at Approved Funding, a licensed mortgage bank. If you're a current or prospective HELOC borrower, here are some ways to find out what you can comfortably afford. Be conservative about tapping in A HELOC allows homeowners to tap their home equity to borrow funds. Considering the average home equity amount is $313,000, homeowners may have access to higher loan limits than some alternatives at better interest rates. However, because HELOC rates are variable, it's important to be conservative so you have room in your budget for any changes. "I think they should think worst-case scenario. I think it never hurts somebody to be thinking conservatively when you're talking about rates that move, let alone rates that can move every month," says Karen Mayfield, national head of originations at Multiply Mortgage, a mortgage-as-a-benefit provider. To help you determine your HELOC affordability, do several exercises and calculate how your payments might change if rates change. "Whatever the interest rate is you're being offered by the lender that you've chosen to go with, I think you should increase that rate by 1% and see how much your payment changes and whether you feel comfortable with that. And then, if you want to be really conservative, increase it by 2%," adds Mayfield. Find out how affordable a HELOC could be today. Know how much you need The great thing about a HELOC is the flexibility. Like a credit card, you can access some of the funds up to your set limit, repay and use the funds again while you're in the draw period. While that's convenient, it can be a slippery slope if you're unclear on how you intend to use the HELOC or are unsure how much you need. Whether you're starting a kitchen renovation you've been putting off or consolidating high-interest debt, know how much you need and try to stick to that amount. So even if you go after a higher line of credit, you're sticking to a plan and only borrowing the home equity amount you need. "What I will always remind people of is just because you asked for, let's say, a $200,000 line of credit doesn't mean you need to spend $200,000. You don't even have to spend $2,000," says Mayfield. Decide if you can pay more than the minimum HELOCs are a unique borrowing tool in that borrowers are typically only required to pay the interest — not the principal — during the draw period. That could potentially be up to 10 years. After the draw period ends, borrowers transition to the repayment period, resulting in a significant jump in the payments, as both the principal and interest must be repaid. If you don't carefully plan for this, it could put a major strain on your budget. That's why it's key to look at your ability to pay more than the minimum when determining HELOC affordability. Paying more than the minimum can help you chip away at your balance and reduce borrowing costs. "When possible, a person can and should pay back principal," Shayowitz says. That can make HELOC repayment more manageable and save you money over the life of the loan. Plus, doing this with a HELOC can still provide a safety net. "Even if you do prepay the principal, you could always draw upon it if you need it later on in the future," adds Shayowitz. The bottom line In today's high-rate climate, a HELOC can be a welcome alternative for homeowners who need access to funds, but it's important to determine HELOC affordability as it has a variable rate that changes. We're in an uncertain rate environment, so you want to be prepared and a well-informed borrower. If a fixed-rate product would be better for you and your budget, another option to look into is a home equity loan. This type of borrowing is not as flexible as a HELOC, as it provides a one-time lump sum of money, but the fixed home equity loan interest rates provide more predictable payments. Before opening a HELOC or taking out a home equity loan, review APRs, terms and fees with various home equity lenders. Understand home equity risks when taking on this type of financing and have a plan to tackle repayment for the best results.
Bloomberg
an hour ago
- Bloomberg
Dutch Government Crisis Risks Slowing EU Decisions, ING CEO Says
The collapse of the Dutch government risks slowing decisions related to Europe's planned investment spree, said ING Groep NV Chief Executive Officer Steven van Rijswijk. At a time when Europe is facing its biggest security initiative since the Cold War and tariff uncertainties, government is needed to play an active role in areas such as digital and defense infrastructure investment, Van Rijswijk said in an interview in Amsterdam on Tuesday.
CBS News
an hour ago
- CBS News
Mortgage rate advice that buyers should know now, according to experts
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Don't take out a mortgage loan without considering what the experts have to say about navigating today's rate landscape. PeilingLeeCopyright/Getty Images Mortgage rates have been high for some time, and it's making it hard for buyers and homeowners alike. Potential homebuyers are hesitant to jump into the market, holding out hope that mortgage rates drop and homes get more affordable. A large percentage of homeowners, on the other hand, managed to secure lower mortgage rates than what's available in today's market. As a result, trading in those low rates via mortgage loan refinancing just doesn't make financial sense in most cases. Still, getting a mortgage right now isn't necessarily a bad idea. It just means borrowers need to be strategic about how they go about it. Find out how affordable a mortgage loan could be today. Mortgage rate advice that buyers should know now, according to experts Are you thinking about buying a house or refinancing your mortgage soon? Here's what experts say you should know. Watch the Fed meetings and tariffs If you're holding out for lower mortgage rates, the best thing you can do is watch the next moves from the Federal Reserve's Federal Open Market Committee, which will heavily impact interest rates on mortgages and all other consumer borrowing and interest-bearing products. "Mortgage rates are likely to trade near their current 7% range through the June 18 FOMC announcement because the Fed is likely to continue waiting for more data," says Jeff Taylor, board member for the Mortgage Bankers Association and founder and managing director at Mphasis Digital Risk. "If core PCE inflation rises when it's next released at the end of June, it would cause upward rate pressure." Lower inflation, on the other hand, could mean the opposite, with reduced rates on loans and mortgages to follow. You should also pay attention to what happens with the new administration's proposed tariffs, which were recently reinstated by a federal appeals court after a brief pause. "Rates have been strongly influenced by both the short-term and long-term uncertainty of the impact of tariffs on the economy," says Darren Tooley, team sales manager at Union Home Mortgage. Compare your top mortgage loan options online now. Use buydowns strategically Most experts predict that mortgage rates will drop at some point this year, but it likely won't be anything "dramatic," Tooley says. In fact, Fannie Mae predicts the average 30-year mortgage rate will drop to 6.1% by the end of the year, while the Mortgage Bankers Association forecasts a 6.6% average — a mere 0.29% lower than today's average rates. If you want these slightly lower rates, you can wait it out or if you need something even more affordable, experts say a temporary rate buydown can be a good option these days. These allow you to pay a fee for a lower interest rate for the first one, two or three years of the loan. "In today's market, don't wait," says Kevin Watson, senior home loan specialist at Churchill Mortgage. "I recommend negotiating a temporary buydown for a couple years as we let this instability settle. Then, if and when rates drop, you can refinance." Acting soon is especially important as home prices keep rising. Once rates drop, experts say prices will increase even more. "While waiting might afford you a lower interest rate, it comes with both risk and possible cost, especially if improved rates trigger a buyer surge that pushes home prices higher," Tooley says. "If you find a home you love and can afford, the best move may be to buy now and refinance later." You can (and should) negotiate With rates where they are, buyers aren't really clamoring for homes like they once were, and that makes lenders and home sellers a little more amenable to negotiations. They might be willing to pay for discount points, which permanently reduce your interest rate, or provide other concessions that can help you offset the costs of higher rates. "Homebuyers can negotiate closing cost credits from sellers, and those credits can be used to pay points to buy down a rate," Taylor says. "In general. it's better to ask for a rate buy down than a reduction in the selling price. Over a 30-year term, the rate buydown offers greater monthly savings compared to the price reduction." You can talk to your real estate agent if you're interested in negotiating a buydown or concession with your seller. If the market is particularly slow in your area or they're motivated to sell fast, they might be willing to make an offer. "Letting the seller buy down the rate to a more affordable payment for your budget is a great idea," Watson says. "Most sellers are accepting these offers today due to the market being a little more buyer-friendly than in the past few years." Think carefully before refinancing Finally, if you're thinking about refinancing, know your reasons. If it's for a lower interest rate or payment, run the numbers. According to the vast majority of homeowners (82%) have a rate below 6% right now, so refinancing at today's higher rates likely won't help in the costs department. If you're considering refinancing to take cash out, improve your home, or pay off higher-interest debts, though, "That isn't a bad idea, as long as you don't run up all those cards again and get into more debt after you refinance," Watson says. You also might think about refinancing if it will remove PMI or if you can refinance into a shorter-term loan. While this would come with a higher monthly payment, it would likely get you a lower rate and help you save significantly on interest in the long run. Just make sure you get preapproved for your refinance early. "Then you can watch the rate market with your lender and lock your rate when rates dip," Taylor says. The bottom line Whether you're buying a home or thinking about refinancing, today's mortgage environment requires a more thoughtful, strategic approach than in years past. While high rates may feel like a barrier, tools like rate buydowns, seller concessions and smart refinancing can help make the numbers work if you plan carefully. Keep a close eye on inflation data, Fed meetings and economic policy changes that could shift rates. And if you find a home that fits your needs and budget, waiting for the "perfect" rate could end up costing you more in the long run.
