7 Stresses on Borrowers' Ability to Repay
September 15, 2015 8:37 AM
Loan performance has improved since the housing crisis. But credit challenges persist, while higher housing costs combined with a plateau in wages have put increased strain on some borrowers' finances.
Some Modified Loan Rates Are Higher
Certain borrowers who had their loan rates reduced through the government's Home Affordable Modification Program could see gradual increases in their monthly bills, with the national median for an upward adjustment totaling about $200.
Resets Hike Payments on Certain HELOCs
About 3 million borrowers who took out home equity lines of credit before the financial crisis will experience payment shocks that average almost $250 per month due to upcoming rate resets.
Non-Mortgage Debt Burdens Continue to Increase
Average borrower debts outside their mortgage are $1,400 higher than a year ago. Student loans in particular have skyrocketed, with 15% of mortgage borrowers today carrying an average of $35,000 in education-related debt.
Home Prices Are Still Skyrocketing
Housing prices in hot markets like the Silicon Valley in California, Seattle and Denver have continued to rise rapidly and are putting a strain on the budgets of homeowners in those areas.
Property Tax Increases
Homeowners in increasingly expensive areas are hit with the double-whammy of not only paying more for their housing, but also more in property taxes, which have increased each year since 2006.
Wages Are Largely Stagnant
Consumers can handle higher costs and debt levels if their wages get higher, too, but what increases there have been in workers' pay have been neutral at best.
A Fed Rate Hike Remains Possible
Despite some signs of economic weakness, the market still believes in the potential for a Federal Open Market Committee decision that raises short-term rates. That can put upward pressure on long-term mortgage rates and other borrowing costs.
