The Mortgage Bankers’ 2Q National Delinquency Survey found that delinquency rates dropped to 3.37% – the lowest rate since it began collecting data in 1979.
NEW YORK– Mortgage delinquency rates in the U.S. recorded an unprecedented low during 2Q (second quarter of 2023), driven by a robust job market and prevailing low interest rates on most home loans.
This accomplishment is notable, despite a significant increase in mortgage rates over the past two years.
The Mortgage Bankers Association’s (MBA) National Delinquency Survey reported that delinquency rates dropped to 3.37% by the end of Q2, the lowest since the MBA began collecting data in 1979 and down from the year-on-year rate of 3.64%.
Seriously delinquent loans, those overdue by 90 days or more or in foreclosure, reached their lowest non-seasonally adjusted rate in 23 years at 1.61%.
Despite the Federal Reserve’s substantial 525 basis point interest rate hike since March 2022, borrowers have navigated rising mortgage costs, supported by a strong job market and solid wage growth. Most homeowners also enjoy interest rates well below those on new loans.
Real estate experts estimated that over eight in 10 outstanding loans had rates below 5% by the close of 2022. Now, more than six in 10 homeowners are paying 4% or less.
Although the prevalence of such low rates is diminishing, many homeowners choose to remain in their homes, rather than relocate and acquire new loans at current rates, which have reached a 22-year high.
Despite the historically low delinquency rate, the MBA cautioned that not every borrower has been able to weather the recent stress of elevated interest rates. For instance, the delinquency rate for loans serving low-income and first-time buyers, supported by the Federal Housing Administration (FHA), increased by 10 basis points annually to 8.95% in Q2.
Separately, the National Association of Realtors released a report stating that the median home price during Q2 declined by 2.4% year-on-year to $406,000. This dip in prices can be attributed to regional disparities and factors such as higher mortgage rates and limited inventory.
Lawrence Yun, NAR’s chief economist, noted that improving affordability is tied to moderating or falling home prices, coupled with increasing job opportunities and incomes.
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Author: kerrys