Credit Sesame’s personal finance news roundup November 9, 2024. Stories, news, politics and events impacting personal finance during the past week.
Federal Reserve cuts interest rates again
The Federal Reserve has announced a 0.25% cut in the federal funds interest rate. This comes on the heels of a 0.50% rate cut at the previous Fed meeting. A 0.25% cut is consistent with the Fed’s traditionally cautious approach of making a series of small rate cuts over time rather than large cuts all at once. The latest rate cut is in line with the Fed’s economic projections. Those show that the Fed expects to cut rates by another 0.25% by the end of 2024 and an additional 1% during 2025. See statement at FederalReserve.gov.
401(k) contribution limits to increase in 2025
The IRS announced that Americans can contribute more to 401(k) plans in 2025. The annual contribution limit is being raised to $23,500. That’s up $500 from the 2024 contribution limit. The contribution limit for IRAs will remain at $7,000 next year. Retirement plan contribution limits are generally adjusted to keep pace with inflation over time, but these changes do not happen every year. The income limits for the deductibility of IRA contributions by eligible people (or with eligible spouses) for employer retirement plans will also be increasing. See details at IRS.gov.
Mortgage rates rise again in November 2024
After falling steadily from the beginning of May through the end of September, 30-year mortgage rates have now risen for six straight weeks. This has pushed those rates up by 0.71% to 6.79%. 30-year rates are now 0.18% higher than when 2024 began but 0.97% lower than 12 months ago. 15-year rates have also seen a sustained rise. 15-year mortgage rates have risen over seven straight weeks by a total of 0.85%. This has brought 15-year rates up to 6.00%. See rate details at FreddieMac.com.
Mortgage applications fall sharply
Mortgage applications fell by 12% in the first week of November 2024. Most of the decline was due to weaker refinance demand. Refinancing applications dropped by 19% last week, while purchase applications fell by 7%. The decrease in mortgage demand is attributed to the recent rise in mortgage rates. Application volume has fallen for six consecutive weeks. This has brought purchase applications to their lowest level since mid-August 2024 and refinancing applications to their lowest level since May 2024. See details at MBA.org.
Home buyers holding out for lower mortgage rates
A new CNET survey found that just 4% of US adults would consider buying a home or refinancing with mortgage rates at 6%. That percentage rises to 18% if mortgage rates drop to 5%. Only mortgage rates as low as 4% would substantially boost the percentage of people considering a home purchase or refinancing worthwhile. 50% of those surveyed said they would consider buying or refinancing a home if mortgage rates were 4% or lower. That may be an unrealistic expectation, as mortgage rates of 4% or lower have historically been uncommon. See article at CNET.com.
Housing statistics demonstrate the challenges for new buyers
An annual report on home buyer characteristics showed how high prices and elevated mortgage rates have made it more challenging for new buyers to enter the market. For the year ending in June of 2024, first-time buyers made just 24% of all home purchases. That’s down from 32% in 2023 and is the lowest share of first-time buyers since the National Association of Realtors began collecting this information in 1981. An all-time high of 26% of buyers paid all cash for their homes, reflecting the unpopularity of today’s mortgage rates. Consistent with the need for more savings to buy a home, the median age of home buyers rose to a new high of 56 years in the latest report. See report details at NAR.Realtor.
FTC charges fintech platform Dave with deceptive practices
Dave, an online platform that offers customers instant cash advances, has been charged by the Federal Trade Commission with imposing fees on customers. The Dave app allegedly does not provide instant advances unless the customer pays a $3 to $25 “express fee.” This fee is not disclosed until the customer has provided Dave access to a checking account. Dave also allows customers to pay additional “tips, ” supposedly to provide meals to needy people. Only a small percentage of those tips go towards that cause. See article at PYMNTS.com.
