Mortgages: Making the most of a mixed market

Homeowners looking to make a move should pay attention, said E. Scott Reckard in the Los Angeles Times. After a slight uptick in recent months, Freddie Mac announced that the average rate for 30-year fixed home loans fell to 4.32 percent last week, while the average rate for 15-year loans fell to 3.32 percent, edging them closer to the historic lows of 2008. In other housing news, a study from the credit bureau TransUnion found that U.S. borrowers are prioritizing their mortgage payments over credit card bills, reversing “a trend dating to September 2008, when the mortgage crisis drove consumer preferences toward paying credit cards first.” The change in outlook suggests that consumers’ “attitude toward housing debt is returning to historical norms,” which bodes well for the overall housing recovery.

Not so fast, said Kathy Orton in The Washington Post. Last week’s announcement from Federal Reserve Chair Janet Yellen that the central bank “has begun to lay the groundwork for increasing interest rates” means that the current lows in the home mortgage market aren’t likely to last long. Plus, the National Association of Realtors reported last week that existing home sales slipped in February for the sixth time in seven months, as harsh “winter weather, rising prices, and a tight supply of homes,” continued to discourage would-be buyers, said the Associated Press. That jibes with other numbers from the Mortgage Bankers Association, which show that fewer people applied for mortgages over a similar period.

All this could be good news for recent refinancers, said Lisa Prevost in The New York Times. A new survey by RedFin, a Seattle-based real estate firm, found that many current homeowners who are planning to buy may keep and rent their existing homes instead of selling. The trend is being driven by the historically low refinance rates they were able to secure combined with the ongoing boom in the rental market. “Of course, most borrowers can’t afford to buy another home without using equity from their first for a down payment,” but well-off homebuyers—those with “good credit and stable, above-average incomes”—might be able to capitalize. But managing a rental property isn’t easy, and there is always a “financial risk of owning two homes in the same market” if home prices tank. Recent refinancers who don’t have enough cash on hand to make a down payment may find themselves “locked into” their current homes. “As interest rates rise, even buying another home at the same price will result in a higher mortgage payment.” With mortgage rates likely to start rising soon, the clock may already be ticking.

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