Mortgage Report - Mortgage Rates Stable In 2006
Below is a MRR and PLR article in category Finance -> subcategory Mortgage.
Mortgage Report: Stable Rates in 2006
Summary
In past decades, high-risk mortgage loans often led to defaults when rates rose, leaving financial companies with the burden. However, a recent study by First American Real Estate Solutions suggests that even if rates increase this year, defaults are unlikely to exceed $110 billion.
The study estimates that 1.4 million of the 7.7 million adjustable-rate mortgages sold in 2004 and 2005 could be at risk. Even so, the financial impact would be minimal due to the strong and diversified U.S. economy, representing only about one percent of total homeowners' equity spread over several years.
Factors Driving the Real Estate Boom
Real estate experts predict a slight slowdown in 2006, but steady gains are anticipated due to ongoing economic growth and a balanced supply-demand ratio.
- Low Interest Rates: Despite slight increases in 2005, rates remain historically low. Many homeowners will refinance to capitalize on increased equity and shift to fixed-rate mortgages.
- Internet Influence: Online access to MLS listings empowers buyers, speeding up the home-buying process and making it more efficient.
- Economic Growth: A robust economy stimulates both residential and commercial real estate activities, leading to corporate relocations and increased real estate transactions.
- Generation X: As baby boomers retire, Gen Xers, with generally higher incomes, are entering the market in force. They now account for 47% of U.S. homeownership, impacting both urban and suburban areas.
UK Mortgages and Insurance Coverage
A report by Sainsbury's Bank indicates that 4.2 million UK mortgages lack life insurance coverage, leaving GBP217 billion in mortgages potentially transferred to heirs. Despite this, rising property values mean that selling inherited homes could still yield significant benefits.
UK Borrowers Favor 2-Year Fixed Mortgages
In January, 39% of UK mortgage borrowers chose 2-year fixed rates, up from 27% in December. Only 9% opted for longer-term fixed mortgages, despite competitive rates. This trend suggests a belief that rates have stabilized, but with uncertainty about future declines.
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