Millions of Americans have a higher rate on their savings account than they’re paying for their mortgage.
Marcus by Goldman Sachs Group Inc. recently raised the interest rate on its high-yield accounts to an all-time high of 4.3%, following the latest hike in the Federal Reserve’s key benchmark rate. At the end of the June, about 39 million US homes had a mortgage rate below 4.375%, according to Black Knight, a mortgage technology and data provider. That was more than 73% of the outstanding mortgages in the US.
The discrepancy illustrates an unusual situation in the economy. During the period of historically low rates during the pandemic, millions of homeowners refinanced or took out mortgages below 4%. Now, after several hikes by the Fed, borrowing costs have surged to nearly 7% for a 30-year, fixed rate loan. Homeowners are reluctant to move and give that up, fueling an acute shortage of available homes.
Higher rates, meanwhile, have been boosting savers. In addition to Marcus, Barclays and Capital One offer rates of 4.35% and 4.3%, respectively.
High-yield accounts generally move in line with the Fed’s benchmark interest rate, which is currently at a 22-year-high. At their July meeting, policymakers left open the possibility of future hikes, depending on economic data.
This article was provided by Bloomberg News.