High Rates and Risky Mortgages, Fuel Fears of Spike in, Foreclosures.
'Newsweek' reports that increased mortgage rates could result in more homebuyers facing a higher risk of foreclosure.
According to the Mortgage Bankers Association, applications for 5/1 adjustable-rate mortgages (ARM) rose 32.5%, while loan rates reached the mid-6% range.
Last week, the total number of ARM applications surged 15%, the highest percentage since November of 2022.
At the same time, fixed mortgages saw steady rate growth, rising from 7.53% to hit 7.67%.
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While most mortgage rates increased last week, rates on ARMs declined, leading to an increase in ARM volume and an increase in overall applications, Joel Kan, MBA Deputy Chief Economist, via 'Newsweek'.
The yield curve has become less inverted in recent weeks, and ARM pricing has certainly improved, Joel Kan, MBA Deputy Chief Economist, via 'Newsweek'.
'Newsweek' reports that, unlike fixed-rate mortgages, ARM loans change to reflect current rates, meaning foreclosure rates could increase over the coming years.
The risk to the buyers is that eventually the rates will go up and they may not be able to afford the home, Rocke Andrews, Mortgage broker, via Realtor.com.
But prices are going up so quickly that, if they wait, they may not be able to afford the home.
This is a way to get into the home now and refinance later, Rocke Andrews, Mortgage broker, via Realtor.com.
According to a study from First American CoreLogic, among 8.37 million ARMs, one in eight were estimated to end in foreclosure, accounting for 1.1 million loans.
