The Finatical
Week of August 9th, 2022 - Mortgage Rates, GM Supply Chains, Quantum-Security Threats
Topic Breakdown - Learn about Mortgage Rates
Introduction
You might know that a mortgage rate is what lenders use as a cost that allows you to borrow or lend their money. In this article, we will cover what a mortgage rate is, the factors that determine this rate, and how to get the best rates. A mortgage rate determines how much interest one must pay during the term of their mortgage. To put it simply, it is the rate of interest at which a mortgage lender charges you. Mortgage rates determine your monthly payments over the time of the loan, and the slightest fluctuation in rate change can greatly impact the amount of money you could pay. Having a good understanding of interest rates and other factors that determine your rate will make it easier for you to deal with understanding mortgages.
Contributing Factors
A few factors that decide your mortgage rate include credit score, down payment, property location, loan type, and loan term. Lenders look at your credit score because it is a measure of how likely you are able to pay the loan back on time; the higher your score, the lower your rates. In addition to credit score, lenders will look at your down payment. A down payment is an initial, partial payment you make when purchasing something expensive, like a car or house. Lenders will more likely lower your mortgage rate if you bring a down payment with a higher percentage, as you’ll be seen as a less risky borrower. Most lenders typically require a downpayment of 20% because it lowers their lending risk. Lastly, loan type and loan term can determine your mortgage rate; shorter-term loans pay lower interest rates compared with longer-term loans since you are paying off the mortgage quicker.
The Impact of a Credit Score
A great credit score that will qualify you for the best mortgage rates is a score of 760 or higher. However, it is not needed to have an ideal credit score of 760; the Federal Housing Administration (FHA) has a minimum credit score requirement of 580 when qualifying for mortgage rates. An ideal mortgage rate is one that is at least equal to or below the current average rate for the loan product. Looking at multiple lenders is one strategy for looking at competitive offers, and comparing different loan fees and term offerings is also helpful. Overall, you just want to be comfortable with the mortgage process and inquire with banks, credit unions, and direct lenders when looking for mortgages.
Financial Trends
Supply Chains’ Impact on General Motors
This Tuesday, General Motors reported its second-quarter earnings and they fell short of Wall Street’s estimations because the company was unable to ship 100,000 vehicles by the end of the quarter, due to part shortages. However, the company was still able to maintain its earnings from last year and is confident that it will be able to rapidly increase its production in the second half of 2022. Additionally, the company has stated that it has accumulated enough supplies of critical battery-related materials for supporting the company's electric vehicle plans. Mary Barra, CEO of General Motors, proclaimed that general motors have “binding agreements' ' for securing all of the battery-related materials for building 1 million electric vehicles in North America by 2025.
Like many other automakers throughout the world, General Motors has been working through supply chain issues and delays for the last several quarters as COVID-19 outbreaks, along with Russia’s invasion of Ukraine – forcing factories to shut down and wreaking havoc with logistics around the world. These disruptions have affected U.S. car dealers the most, due to the limited inventory. Over the last year, dealers have only had 10 to 15 days worth of inventory, which has been more constrained compared to the 60-90 days’ worth that was common prior to the COVID-19 pandemic. Another reason for General Motors falling short of its estimations on Wall Street is because the company registers revenue when a completed vehicle is delivered to car dealers, and not prior.
JPMorgan’s Protection From Quantum-Security Threats
This Thursday, JPMorgan hired a Singapore-based quantum computing expert, Charles Lim, to act as the bank’s global head for quantum communications and cryptography. He was an assistant professor at the National University of Singapore and at JP Morgan, he will focus on researching future computing technology in secure communications, according to Marco Pistoia, who runs the bank’s global technology applied research group. Pistoia has built a team at JPMorgan that specializes in quantum computing and other forms of nascent technologies. They are focusing on creating qubits that are not binary, but can simultaneously act as a combination of both zero and one, and any values in between. As futuristic technology continues to advance, it promises the ability to solve problems that are beyond the capability of traditional computers.
In finance, machine learning algorithms will prioritize improving in detecting fraud in transactions and other areas that involve “prohibitive complexity”, such as portfolio optimization and options pricing. The encryption techniques that take place in the world’s communications and financial networks would immediately be rendered completely useless when advanced computing technology becomes a real thing. Hence, JPMorgan decided to hire Charles Lim, as they hope that he will lead them in the advanced computing technology field in studying the next generation of quantum-resistant communication networks. Lim will also focus on pursuing foundational research in quantum information and creating innovative solutions for enhancing the security, efficiency, and robustness of financial and banking services at JPMorgan.
Financial Guidance
“Stay committed to your decisions, but stay flexible in your approach.” ― Tony Robbins
Delving into something as unpredictable and dynamic as the economy and investing means that the approaches and methods you were considering can become unviable in a short period of time. As such, it’s important to note that while you shouldn’t change your end goal, it’s possible to change your approach to get to that end goal.
Term of the Week
Credit score - You hear this mentioned everywhere; from YouTube ads, banks, and mortgages, but what actually is it?
A credit score is a number that is assigned to each person that indicates their likelihood of paying back a loan on time. Banks and other institutions use this value to determine whether they will approve a person to take out a loan from them or determine the interest they should pay back on the principal. A person’s credit score depends on a number of factors, such as but not limited to: current unpaid debt, billing history, and amount of past debt. Depending on the factors used to calculate it by different institutions, it is common for people to have more than one credit score. Most credit scores will range from between 300 to 850.