Uncertainty with the economy caused fewer Americans to apply for mortgages in recent weeks, but mortgages are being paid on time at the highest rate since the housing market crashed in 2008, surveys say. Applications for home purchases have steadily increased compared with 2012 but rising interest rates on loans along with doubts about the economy caused a decline in applications for new mortgages, says Jay Brinkmann, chief economist for the Mortgage Bankers Association. Mortgage applications fell 1.8 percent in the week ended Nov. 8, according to the weekly mortgage application report from the association. The rate of mortgage applications also declined by 2.8 percent in the week ended Nov. 1, according to the industry group.
"Uncertainty about the economy is causing people to sit back and say 'let me rent for a bit and see where it goes," Brinkmann says.
Meanwhile, payments on mortgages that are at least two months late steadily declined from 5.33 percent in September 2012 to 4.09 percent in September 2013, according to a survey published on Tuesday by credit reporting agency TransUnion. That is the lowest level of late mortgage payments recorded by TransUnion since 2008 prior to the crash of the housing market.
Surveys by the Mortgage Bankers Association also report a steady decline of delinquent mortgage payments, with the new mortgages being less of a delinquent problem than unresolved loans issued prior to the housing market crash, Brinkmann says.
"Of the mortgages that are out there about three quarters of the problem loans originated in 2007 or earlier," Brinkmann says. "It is still sort of a hangover of some of the loans made in the last decade."
The association projects average interest rates to increase to 5 percent in 2014 and rise further to 5.3 percent by the end of 2015. Higher interest rates are not a definite way to predict whether or not someone is going to buy a home, Brinkmann cautions.
"People tend to buy for lifestyle reasons when they need to more than because of interest rates," Brinkmann explains. "It's the second baby and the one bathroom that drives more housing decisions than anything else."