As inflation and interest rates continue to rise, companies are forced to look at ways to enhance their mobility programs to meet the financial challenges facing today’s transferees.
It is important to begin thinking about available support options in order to be well prepared for the time when change is needed. Our recent survey showed that while 60% of clients are not considering making any policy changes until interest rates reach 8%, 30% are considering adding COLA and another 10% are considering adding mortgage points.
From simple changes that are easy to implement to those more complicated benefits, there are many options for additional assistance available. Aires offers various levels of support to help ease the transition to the new location. We recommend the following considerations:
- Miscellaneous and Lump Sum Allowances: Increasing the allowance amount is the simplest policy change to make and allows for more cash on hand to assist with increased costs.
- Mortgage Points: Paying discount points has not been a consideration for most companies due to historically low rates up until 2022. A point is additional money paid to the lender at the time of closing to “buy down” the interest rate. One point (1% of the mortgage amount) is the most common in times of extreme rates.
- Mortgage Interest Differential (MIDA): This is a payment made directly to the lender to offset the increase in the new home’s interest rate. The calculation compares the interest rate and the loan balance of the home sold, and applies a calculation based on the percent increase in the interest rates.
- Mortgage Subsidy: Subsidies intend to address the baseline increase in housing costs to ease the impact of moving to a higher cost of housing and require a 10% or greater cost of living differential. Subsidies can be dollar-value based or interest-rate based and are calculated with a COLA report that includes housing values (sources may include ERI or Mortus).
- Cost of Living Assistance (COLA): COLAs intend to address the overall increase in daily living, housing, and tax costs between origin and destination. COLA payments are calculated by a third-party (sources may include ERI or Mortus).
There are many options available to help ease the increased costs currently being experienced. Implementing benefits that align with your company culture and cost initiatives will have a positive impact on your employees and program.
In addition to the information in this post, Aires has developed additional materials and tools to assist you with navigating these issues. For additional information and specific policy advice, please contact your Aires representative.