Rising Rates
For the first time in many years since the housing collapse, interest rates are starting to climb on fixed rate mortgages. This is largely in part due to the Federal Reserve decreasing its involvement in the mortgage support market. With less control from the Fed rates are driven primarily by inflation and economic factors allowing the to climb along with forecasted economic growth in 2014. Not to worry, fixed rate mortgages will still have interest rates that are considered low historically.
Strict Regulations
New guidelines for lenders to follow with require consumers to have a greater awareness of the loan process and what it takes to be qualified for a loan. The Dodd Frank Act has passed the ability to repay rule. Lenders now need to perform due diligence in verifying a borrower’s ability to repay, and any mortgage application with a debt to income ratio above 43% will not be considered a qualified mortgage. Following the criteria of qualified residential mortgages will protect lenders against lawsuits from borrowers. This will make pre-qualification guidelines stricter and force borrowers to learn who can and cannot be approved for a home loan.
Non-Existent Refinance Market
With the increases of rates and regulations the population who qualify for refinances already took advantage of refinance products. Mortgage lenders all over the country are changing their focus to new home purchases for their main source of profit.
Homeownership will Decline
Zillow is estimating that homeownership will decline to less than 65%, the lowest point it has been since the mid 1990’s. With rising real estate costs, and strict regulations homeownership is not affordable for many. This is coupled with the younger generation who is waiting to buy, and the baby boomer generation who is selling and leaving the real estate market.