U.S. Bank suggests three ways that mobility program managers can entice talent using mortgage-based benefits.

Relocation inevitably requires an employee to confront uncertainties whether settling into a new work role or helping their family adjust to living in an unfamiliar destination. A particular area of concern for today’s transferees is the increasing cost of financing a home given rising mortgage interest rates. Higher interest rates can drive reluctance to relocate among employees who are homeowners, especially if market rates are significantly higher in the new location. This challenge could become widespread given the extended period of historically low rates that preceded today’s market volatility. Some notable trends for mobility program managers to be aware of include:

• Home affordability: In general, affordability remains a top concern among homebuyers since median U.S. home prices now exceed $400,000.
• Market conditions: 2024 began with most experts agreeing that rates could hover in the 6% to 7% range. Rates hit 7.250% in May, and though they’ve since eased, the consensus originally called for them to be around 6% by the end of the year. That didn’t happen, and now rates are expected to remain in this same range as the Feds work on counter-inflation measures.
• Price appreciation: Depending on the employee’s departure home rate, the combined impact of price and rate appreciation on a new mortgage payment can be significant.

With competition for talent as intense as ever, sitting on the sidelines and waiting out these trends is not an option for most mobility program managers. Deliberate adjustments or additions to benefits may be necessary to ensure affordability concerns related to higher rates do not impede talent objectives. Below are three options that U.S. Bank recommends program managers consider when helping transferees navigate the high-interest rate environment:

1. Points/utilizing a sliding scale: One mortgage point is equal to about 1% of a borrower’s total loan amount. Points are essentially a form of interest that’s paid up front at closing in exchange for a lower interest rate for the life of the loan. Historically, they’ve been used to assist relocating employees facing higher rates on a destination home purchase. Some corporate mobility policies have a sliding scale for points coverage tied to the current market rate.
2. A temporary buydown: A great tool to ease a borrower into a higher payment caused by today’s interest-rate environment and higher cost of housing is a temporary buydown. Buydowns can be structured in multiple ways and are available on all loan products through U.S. Bank (conforming, jumbo and government loans). Typically, the benefit amount is incrementally stepped down – anywhere from 2 to 5 years – and can be dollar-based or interest rate-based. The dollar-based option is best suited to managing the benefit to a firm budget.
3. Mortgage interest differential allowance (MIDA): This option commonly requires a minimum rate differential between departure and destination homes to qualify. So, the quoted rate on a similar product would need to be 2% or 3% more than the current interest rate. A MIDA may be applied as a temporary buydown in either a dollar-based or rate-based model, and if there’s already a cost-of-living allowance (COLA) provision, the MIDA can be applied in addition to those funds.

Adopting or enhancing these provisions within your relocation policies can help ease concerns related to today’s volatile rate environment. It can also drive positive relocation experiences and ensure that mobility benefits support rather than hinder talent attraction and retention goals.

Your U.S. Bank client relationship team is available to guide you to options that best suit your program’s unique needs. They can also provide insights on how best to track and report your program, assist with composing a business case for utilization of the benefits, walk you through options for a particular transferee and help you better understand estimated costs.