Is It a Good Time to Update Your Mortgage Subsidy Policy?
With the recent announcement that mortgage rates are down again, it may be a good time to review your policies if you’re a global mobility manager with activity in the U.S.
Since mortgage rates have been very low for a while now, we may not remember that, back in the 1980s, mortgage rates were in the mid-teens. During that time, mortgage subsidies were a big help to relocating employees because they effectively brought rates down often by 3% in the first year, 2% in the second year, and 1% in the third year. Many employees would then relocate again, and frequently rates were a bit lower for the next relocation.
Today, with such low rates, subsidies are not always needed. However, if someone is moving to a higher-cost location, employees may still need support due to the robust and competitive real estate market. Most companies have removed the mortgage subsidy itself for now (using instead the Mortgage Interest Differential) and are offering a cost of living adjustment (COLA) in the employees’ paycheck instead. This seems like a smart idea until mortgage rates rise substantially. If you still have a subsidy in your policy, you may want to consider another way to put those funds to use.
Read about the robust housing market in our earlier blog, Exploring the Unprecedented 2021 Real Estate Market and Its Effect on Your Mobility Program, and learn about Mortgage Subsidies in this newsletter from one of our partners, Guaranteed Rate Affinity.