Record Low U.S. Mortgage Delinquency Rates Defy Rising Interest Rates

This achievement is particularly noteworthy despite a substantial increase in mortgage rates over the past two years.

The second quarter of the year witnessed a remarkable drop in mortgage delinquency rates in the United States, reaching an all-time low.

A recent report attributed this trend to a robust job market and the prevailing low interest rates on the majority of home loans.

This achievement is particularly noteworthy despite a substantial increase in mortgage rates over the past two years.

According to data collected by the Mortgage Bankers Association’s National Delinquency Survey, delinquency rates reached an impressive low of 3.37% by the close of the second quarter.

This figure stands as the lowest recorded since the inception of data collection in 1979, down from the previous year’s 3.64%.

The report also highlighted a significant decline in seriously delinquent loans, those that are 90 days or more overdue or in the foreclosure process.

This category reached its lowest non-seasonally adjusted rate in 23 years, settling at 1.61%.

Amidst the backdrop of the Federal Reserve’s bold move to raise interest rates by 525 basis points since March 2022, economists are vigilantly monitoring these mortgage delinquency rates.

This aggressive interest rate hike has led to increased borrowing costs across the spectrum.

The Mortgage Bankers Association noted that many borrowers have managed to withstand the surge in mortgage costs, largely due to the resilient job market and substantial wage growth throughout the year.

Moreover, a significant number of homeowners are currently benefiting from interest rates significantly lower than those offered for new loans.

Although a declining proportion of homeowners are able to secure such favorable rates, many are opting to remain in their current homes rather than take on new loans at the current elevated rates.

However, despite this historic low in delinquency rates, the report did underscore that not all borrowers have been immune to the pressures of rising interest rates.

Notably, delinquency rates for loans aimed at low-income and first-time buyers, backed by the Federal Housing Administration, saw a 10 basis point increase year-on-year to 8.95% in the second quarter.

Simultaneously, the National Association of Realtors released a separate report revealing a 2.4% year-on-year decline in the median home price during the second quarter, reaching $406,000.

This dip in prices was attributed to varying conditions across the nation, and experts explained that the decrease was influenced by higher mortgage rates and limited housing inventory.

Lawrence Yun, Chief Economist of the National Association of Realtors, emphasized that affordability challenges were gradually easing due to these changing dynamics, coupled with a positive trend in jobs and incomes.

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