Week of February 14th, 2023 - Wills, Mortgage Refinances Skyrocket, Inflation Persists
The Risks with Unequal Inheritances by Brandon C. Walecka, CC BY-SA 3.0
Topic Breakdown - Pensions
Many people want their assets to go to their friends, family, or a charity when they pass away, but is there any way to make sure that this happens? Yes! The answer is a will. In this article, we will cover what a will is, why it is important to have one, and what happens if you die without a will.
A will is a legally binding document that directs the division of your possessions after your death and can even name guardians for children. To start, a will normally contains an executor. An executor is in charge of ensuring that all instructions are followed in accordance with the intentions of the deceased. After that, there is a list of beneficiaries or the individuals who will inherit the decedent's possessions. Along with this, you can make a list of everyone you want to leave your possessions to. You can opt to leave everything to your spouse or children or you can choose a more complex plan, such as sharing all of the money in your estate among several relatives. You should mention to who you wish to leave particular pieces of physical property in addition to cash holdings. Finally, if your children are minors, you can name guardians for them. This might also be part of a joint will between two spouses.
So why exactly is it so important to go through the process of creating a will? Having a will permits you to choose who will inherit your assets when you die. Writing a will also allows you to specify who will be in charge of overseeing and managing the distribution of your estate. Also, designating a trustworthy and unbiased Executor ensures that the terms of your will are followed. Including your funeral arrangements in your will can even relieve anxiety for loved ones and assure that your remains are treated as you intend. A legal will is also often faster and less expensive to settle an estate. Reduced legal expenses safeguard the value of your property and allow you to pass savings on to beneficiaries.
Absence of a Will
Lastly, we will cover what happens when you pass away without writing a will. In the absence of a will, the state in which you reside determines how your assets are distributed to your beneficiaries in accordance with its rules. This is known as dying intestate, and the ensuing settlement procedure may not deliver the desired benefits for your survivors. A state's plan usually represents the legislature's best judgment as to how most individuals would dispose of their estates and includes safeguards for specific beneficiaries, notably minor children. That plan may or may not represent your real preferences, and some of the built-in safeguards may not create a peaceful family environment. You can avoid this by having documentation created that represents your preferences.
Mortgage Refinance Demand Skyrockets
Mortgage rates continued to fall this past week, as both current homeowners and potential homebuyers reacted quickly. According to the Mortgage Bankers Association's seasonally adjusted index, the total mortgage application volume, consisting of refinances and loans needed to purchase a home increased by 7.4% last week. Additionally, the average contract interest rate for the standard 30-year fixed-rate mortgages with conforming loan balances ($730,000 or less) decreased by 0.01%, with basis points also dropping by 0.01 points for loans coupled with a 20% down payment. Despite interest rates being the lowest that they have been since early September, refinance demand surged by 18% weekly, however, was still 75% lower than the same week exactly one year ago.
The refinance share of mortgage activity increased by nearly 3% of total applications from the prior week with mortgage applications to purchase homes rising by 3% as well but 37% lower compared to last year. According to an MBA economist, Joel Kan, “Purchase activity that was put on hold last year due to the quick run-up in rates is gradually coming back as rates ease and housing demand remains strong, driven by supportive demographics and the ongoing strength in the job market”. The average loan size on a purchase application has increased to $428,500 indicating that the recent upward trend in purchase activity remains in favor of large loan sizes and fewer first-time homebuyer activities.
Central Bank’s Actions Fail to Combat Inflation
This Tuesday, Minneapolis Federal Reserve President, Neel Kashkari mentioned that the exponential growth in the job market is a key indicator that the central banks have a lot more work to complete when it comes to cooling down inflation. This means that they will still have to increase interest rates as he thinks that the Fed’s benchmark borrowing rate should rise to 5.4% from their current range of 4.5% to 4.75%. He believes that it is critical to raise interest rates aggressively to put a cap on inflation, then let monetary policy work its way through the economy.
There was some positive news regarding the labor market as more jobs were created despite the Fed’s efforts to use higher interest rates for fixing the “imbalances' ' that officials were concerned about in the labor market between supply and demand. Currently, there are nearly two open jobs for every potential employer along with hourly wages rising by 4.4%, which was once considered by the Feds to be a pace that was unsustainable and inconsistent with their 2% inflation level goal. Kahskari also mentioned that the data regarding the nation’s economy and job market indicates that there has not been enough strict regulation on the labor market and wants to increase the Fed's fund rate to 5.4%, which is even more aggressive than his fellow policymakers setting it at 5.1%. The funds rate is what banks charge each other for overnight lending but it also feeds into a multitude of consumer debt components such as car loans, mortgages, and credit cards.
“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.” – Ayn Rand
Money is not your life; rather, it’s something that you should use as a tool to help improve your life, to build a comfortable life for you and the people you care about.
Term of the Week
Trade sanctions: Trade sanctions are various restrictions that are placed by a country on another country, group, or individual. It can include various methods such as the blocking of assets or trade restrictions. While it is usually done for economic reasons, it is also often employed by countries for various political, military, and social justifications.