Four Predictions for Mortgage Industry in 2017

The Mortgage had its fair share of surprises in the year 2016. A sudden upsurge in the mortgage interest rates took many by surprise, as the rate for ‘30-year mortgage’ rose sharply in the month of November, 2016.

While the mortgage rates are predicted to surge further in 2017, which may no longer be a surprise, though, few impending aspects could well take the mortgage industry by surprise. Nonetheless, discussed below are some of the more plausible predictions, which don’t qualify as possible revelations.

1. Home prices could rise further

As expected, the dream home would become a lot dearer, because the demand for houses shows no signs of relenting. It means the first time home buyers could have the affordability factor staring them in the face.

The intemperate scenario can be attributed to the decline in the housing inventory, and as demand outpaces supply, the surge in prices would mean a further squeeze on borrowers. Though, it could all change if the housing inventory is given a boost by the concerned authorities and is backed by adequate government intervention.

2. Freddie Mac and Fannie Mae could undergo a restructuring

The Federal Home Loan Mortgage Corporation (also known as Freddie Mac) and Federal National Mortgage Association (Fannie Mae) are government-sponsored enterprises that have played a vital role in the US mortgage industry since their inception. The new administration is now planning to restructure these two critical enterprises and could well have them privatized.

Though the assessment of the implications may require further details, the predictions indicate a potential rise in the debt-to-income ratio. As this metric links the amount of debt with the borrower’s income level and other liabilities, it means that individuals who are already in a huge debt might find it difficult to get a loan. Such as scenario can be avoided if the government can protect the interest of the low-income borrowers during the restructuring process.

3. There’s room for optimism

The pre-election season noticed a wave of market warnings in the event of a Trump win. However, the expected increase in infrastructure and defense spending could potentially boost the wages in the months to come. Contrary to the earlier sense of caution, which now seems to subside, a pro-bank economic scenario should be a boost for the realty sector. If the rates are kept under control, the lending institutions would surely do their bit to make the home buying a pleasant experience for all types of borrowers.

4. Scorching markets could lead to price corrections

Continuous thrust in interest rates is a scenario that forces the buyers to backtrack on their decision. As the hike in payments reaches agonizing levels, the homeowners do not often wait for best offers to sell off their estate. Such a spree in property disposals can boost the housing inventory, which then acts as a deterrent to the further hike in prices.

In the current scenario, as the interest rates continue to rise and with the wages not being able to catch up, such as correction can be predicted in 2017. These indications should prevent homeowners from selling their property in haste, as they could end up paying exaggerated prices for their next home, only to see the prices drop after the purchase.

All these trends point to a gripping environment as far as the mortgage industry is concerned. However, if the impending innovations that can revamp the housing sector get implemented with diligence, 2017 could witness the mortgage industry succeed even with the escalating rates.